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 I^art, &c|)affttr & ;Plarj; 
 Pd|e Economic Csteapct 
 
 THE CAUSE AND EXTENT OF THE RECENT INDUS- 
 TRIAL PROGRESS OF GERMANY. By Earl D. Howard. 
 
 THE CAUSES OF THE PANIC OF 1893. By William J. 
 Laack. 
 
 INDUSTRIAL EDUCATION. By Harlow Stafford Person, 
 Ph.D. 
 
 FEDERAL REGULATION OF RAILWAY RATES. By Al- 
 bert N. Merritt, Ph.D. 
 
 SHIP SUBSIDIES. An Economic Study of the Policy of Sub- 
 sidizing Merchant Marines. By Walter T. Dunmore. 
 
 SOCIALISM: A CRITICAL ANALYSIS. By O. D. Skelton. 
 
 INDUSTRIAL ACCIDENTS AND THEIR COMPENSATION. 
 By Gilbert L. Campbell, B. S. 
 
 THE STANDARD OF LIVING AMONG THE INDUSTRIAL 
 PEOPLE OF AMERICA. By Frank H. Streightoff. 
 
 THE NAVIGABLE RHINE. By Edwin J. Clapp. 
 
 HISTORY AND ORGANIZATION OF CRIMINAL STATIS- 
 TICS IN THE UNITED STATES. By Loms Newton 
 Robinson. 
 
 SOCIAL VALUE. By B. M. Anderson, Jr. 
 
 FREIGHT CLASSIFICATION. By J. F. Strombeck. 
 
 WATERV/AYS VERSUS RAILWAYS. By Harold Glenn 
 Moulton. 
 
 THE VALUE OF ORGANIZED SPECULATION. By Harri- 
 son H. Brace. 
 
 INDUSTRIAL EDUCATION: ITS PROBLEMS, METHODS 
 AND DANGERS. By Albert H. Leake. 
 
 THE UNITED STATES INTERNAL TAX HISTORY FROM 
 I 86 1 TO I 87 I . By Harry Edwin Smith. 
 
 WELFARE AS AN ECONOMIC QUANTITY. By G. P. Wat- 
 kins. 
 
 CONCILIATION AND ARBITRATION IN THE COAL IN- 
 DUSTRY IN THE UNITED STATES. By Arthur E. Suf- 
 fem. 
 
 THE CANADIAN IRON AND STEEL INDUSTRY. By W. J. 
 A. Donald. 
 
 THE TIN PLATE INDUSTRY. By D. E. Dunbar. 
 
 THE MEANS AND METHODS OF AGRICULTURAL EDU- 
 CATION. By Albert H. Leake. 
 THE TAXATION OF LAND VALUE. By Yetto SchefteL 
 
 HOUGHTON MIFFLIN COMPANY 
 Boston and New York
 
 WjCKxt, ^c^affnet: & (TUarx Qprij^ <&bbci^9 
 
 XXII 
 
 THE TAXATION OF LAND VALUE
 
 THE 
 TAXATION OF LAKD VALUE 
 
 A STUDY OF CERTAIN DISCRIMINATORY 
 TAXES ON LAND 
 
 By YETTA SCHEFTEL 
 
 BOSTON AND NEW YORK 
 
 HOUGHTON MIFFLIN COMPANY 
 
 (tlie Slitiecjeiitie pce^tf Cambcibsc 
 
 1916 
 
 85T82
 
 COPYRIGHT, 1916, BY BART, SCHAFFNR MARX 
 ALL RXOKTS RESSRVBD 
 
 Publisktd Dectmber iQtb
 
 (^ 
 ^ 
 t 
 ^ 
 
 ^ 
 
 531 
 
 TO 
 
 PROFESSOR ROBERT F. HOXIE 
 
 FROM WHOSE BIOH STANDARD 
 
 OF SCIENTIFIC BESEABCU Ain> KKEN CBITICI8M 
 
 THE WBITBK DKKIVED INESTIMABLE PBOFIT 
 
 AND INSPIBATION
 
 PREFACE 
 
 This series of books owes its existence to the generosity 
 of Messrs. Hart, Schaffner & Marx, of Chicago, who have 
 shown a special interest in trying to draw the attention of 
 American youth to the study of economic and commercial 
 subjects. For this purpose they have delegated to the un- 
 dersigned committee the task of selecting or approving of 
 topics, making announcements, and awarding prizes an- 
 nually for those who wish to compete. 
 
 For the year ending June 1, 1915, there were offered: 
 
 In Class A, which included any American without re- 
 striction, a first prize of $1000, and a second prize of $500. 
 
 In Class B, which included any who were at the time 
 undergraduates of an American college, a first prize of 
 $300, and a second prize of $200. 
 
 Any essay submitted in Class B, if deemed of sufficient 
 merit, could receive a prize in Class A. 
 K The present volume, submitted in Class A, was awarded 
 
 first prize in that class. 
 
 J. Lauhence Laughun, Chairman, 
 
 University qf Chicago, 
 J. B. Clark, 
 
 Columbia University. 
 Henet C. Adams, 
 
 University of Michigan. 
 Horace White, 
 
 New York City. 
 Edwin F. Gay, 
 
 Harvard University. 
 
 ^.
 
 CONTENTS 
 
 CHAPTER I 
 
 THE TAX ON LAND VALUE 
 
 Ljntroduction: The Problem of Local Revenue 1 
 
 f^JTNature of the Tax Purpose of this Study' .... 8 
 
 S S^efinition of the Tax 4 
 
 j-^iTDifferent Forms of the Tax 7 
 
 \'o. The Tax on Value Increment 
 
 6. The Tax distinguished from other Land Taxes . . . .11 
 
 7. The Tax on Selling Value 14 
 
 8^ Relation to the Single Tax 15 
 
 '^ Coimtries where the Tax is in Operation 17 
 
 \ 10. Sunmuiry 18 
 
 CHAPTER n 
 
 LAND TAXES IN AUSTRALASIA 
 
 1. Introductory : The Character of the Colonies .... Id 
 
 2. Settlement and Land Tenure 20 
 
 3. The Chief Causes of the Enactment of the Land Taxes 
 
 Landed Monopoly and Absenteeism . . . . . .23 
 
 4. Fiscal Needs the Occasion for the Adoption of the Land 
 
 Taxes 26 
 
 5. Causes of the Enactment of Local Rating on the Unimproved 
 
 Value 28 
 
 % 6. Influence of the Single Tax Propaganda 31 
 
 \ 7. The Land Tax in the Fiscal Systems of the Colonies Its 
 
 Prevalence 34 
 
 % 8. Legislation in New Zealand : Rates of Tax, Methods of Assess- 
 ment and Levy 30 
 
 9. Rates of Tax and Methods of Assessment in the Common- 
 wealth of Aiistralia 41 
 
 10. Historical Development of the Land Taxes in Australia . . 44 
 
 11. The System of Local Rates in Queensland 48 
 
 12. Local Option on Rating in New Zealand 50 
 
 13. Local Taxation in New South Wales 53 
 
 14. The Federal Land Tax: Rates of Tax, Methods of Assessment 
 
 and Levy 55 
 
 S 15. Summary 59
 
 X CONTENTS 
 
 CHAPTER m 
 
 AND TAXES IN AUSTRALASIA {concl%ided) 
 
 1. Importance and Difficulty of Accurate Valuation of the Land 
 
 minus Improvements System in Australasia ... 61 
 
 2. General Administration of the Taxes 62 
 
 8. Methods of Land Appraisal . 67 
 
 4. Definitions of "Capital Value," "Unimproved Value," the 
 "Value of Improvement," and "Improvements" to guide 
 
 Valuers 69 
 
 6. Summary: Efficacy of the Methods of Valuation ... 75 
 6. Fiscal Considerations: The Incompatibility between the Fiscal 
 
 and Social Interests in Taxation 78 
 
 7. The State Taxes considered Fiscally 79 
 
 8. Fiscal Results of the Commonwealth Tax 83 
 
 9. The Local Taxes considered Fiscally 88 
 
 10. Summary of Fiscal Considerations of Tax 95 
 
 11. Effect of the Taxes on the Disintegration of the Large Land- 
 holdings 96 
 
 12. Causes of the Inefficacy of the Taxes in Work of Disintegra- 
 tion 99 
 
 13. Discriminatory Feature helped by Liberal Exemptions from 
 
 Taxation 103 
 
 14. Social and Economic Effects Shght and Difficult to 
 
 Trace 105 
 
 15. Simamary of Effects on Building Trade, Speculation, Rent 
 
 Incidence of the Taxes 106 
 
 CHAPTER IV 
 
 THE TAX ON VALUE INCREMENT IN GERMANY 
 
 1. Introduction: The System of Local Taxation in Germany . 121 
 2. Reform of 1893 in Prussia affecting Local Taxation . . .124 
 3. The "Umsatzsteuer" as Precursor of the Increment 
 
 Tax 125 
 
 4. "Steuer nach dem gemeinen Wert" replacing the Land Taxes 
 
 on Rental and Product 128 
 
 5. Characteristics of the Increment Tax 129 
 
 6. Analysis of the Frankfurt Ordinance showing the Relation of 
 
 the Increment to the Land Transfer Tax 132 
 
 7. Principle of "Unearned Increment" as Underlying Tax 
 Origin of Concept in Phenomenal Development of German 
 Cities Speculation and Housing Problem . . . .134 
 8. "Sozialpolitik" and Restriction of Private Land Owner- 
 ship 138 
 
 9. Theory of Benefit inapplicable to German Tax . . . .141
 
 CONTENTS 
 
 xt 
 
 510. Influence of the "Bodenreform" Movement 143 
 
 5 11. History of the Enactment of the Increment Tax Laws Im- 
 perial Tax of 1911 144 
 
 12. Methods of Assessment and Levy 146 
 
 13. Explanation and Interpretation of Method 148 
 
 14. Exemptions: their Purpose 162 
 
 S 15. Progressive Scale of Rates 155 
 
 16. Division of Proceeds of Tax among the Imperial, State, and 
 
 Local Governments 158 
 
 17. Administration of Tax 160 
 
 18. The Local Taxes: Various Methods of Assessment and of deal- 
 ing with Retroactive Feature 163 
 
 19. Rates, Exemptions, Reductions, in Local Ordinances . . 165 
 
 20. Fiscal Returns from Local Taxes 173 
 
 21. Status of Localities to Tax since the Amendment of the 
 
 "Reichzuwachssteuer" in 1913 176 
 
 22. Fiscal, Social, and Economic Effects 177 
 
 23. Taxation of Land in Kiao-chau: Causes of Introduction of 
 
 Tax " Sozialpolitik, " not Taxation 184 
 
 24. Taxation Provisions 185 
 
 25. Effects and Proceeds of Tax 187 
 
 CHAPTER V 
 THE ENGLISH LAND-VALUE DUTIES 
 
 1. Underestimation of the Fiscal Aspect of the Land- Value 
 
 Duties Landlordism and Land Taxation .... 190 
 2. Movement toward Land- Value Taxation Legislation and 
 
 Reports on the Expediency of Tax for Local Purposes, 1884- 
 
 1906 < . 196 
 
 8. Continued Agitation and Legislation, 1906-10 .... 201 
 4. Opposition of Lords the Direct Cause of the Incorporation of 
 
 Duties in the Budget 205 
 
 5. Social Reform the Dominating Motive of the New Taxes 
 
 Forms of Taxes a Proof 207 
 
 6. Introduction to Analysis of the Four Duties .... 210 
 
 7. Value-Increment Duty 211 
 
 8. Reversion Duty 217 
 
 9. Undeveloped Land Duty 222 
 
 10. Mineral-Rights Duty Causes and Probable Effects of the 
 
 Changed Scheme for Taxing Minerals 227 
 
 11. Analysis of System finally adopted . . . . - . . . 230 
 
 12. Administration and Valuation 283 
 
 13. Actual Progress made in Valuation Provisions with Regard 
 
 to Appeal Test Cases 238 
 
 S 14. Fiscal Effects 244 
 
 S 15. Economic Effects 247
 
 zii CONTENTS 
 
 CHAPTER VI ; 
 
 MUNICIPAL TAXATION IN WESTERN CANADA 
 
 1. Local Taxation in Canada explained from the Standpoint 
 
 of Fiscal Expediency 251 
 
 2. Economic and Social Conditions compared with those in Aus- 
 tralasia Increase in Population and Land Value . .252 
 
 3. The Wild-Land Tax of British Columbia, the First Land- 
 Value Tax levied in Canada Wild-Land and Increment 
 Tax in Alberta 258 
 
 S 4. Option of exempting improvements from Taxation granted 
 the Local Authorities Later made Compulsory in Alberta 
 and in the Rural Municipalities of Saskatchewan . . .261 
 
 5. Causes of the Introduction of the Tax 266 
 
 6. Prevalence and Natm-e of "Smgle Tax" System . . . .269 
 
 7. Administration of the Tax Special Provisions with regard 
 
 to Assessment 273 
 
 S 8. Fiscal Expediency of Tax due to Unusually Favorable Condi- 
 tions of Rising Land Value 277 
 
 9. Working of System in Times of Business Depression In 
 
 Static Communities 284 
 
 10. Incidence of the Land Tax 290 
 
 11. Economic and Social Effects DifBcuIt to Trace Effect on 
 
 Building Trade 291 
 
 S 12. Economic Results offset by other Influences Speculation 
 
 in Land Wages 296 
 
 IS. Possibility of Extension of System in Eastern Canada . . 299 
 
 CHAPTER Vn 
 
 THE TAX IN ITS FISCAL ASPECT 
 
 S 1. General Summary of the Various Forms and Purposes of the 
 
 Tax S02 
 
 2. The Tax classified A Form of Realty Tax Both Sub- 
 sidiary and Single 804 
 
 8. Levied by Local, State, or National Government according 
 
 to Purpose and Form 305 
 
 4. Fiscal Principles of Tax Theory of Incidence .... 308 
 5. Incidence complicated by Effects of Tax on Building Opera- 
 tions 311 
 
 6. Principle of "Amortization" 815 
 
 7. Difficulties involved in Taxing the Capital Value of Realty . 317 
 8. Capital versus Rental as Basis of Assessment .... 320 
 9. Tested by Canons of Taxation Canon of Justice not 
 
 strictly applicable to Tax . , 322
 
 CONTENTS xia 
 
 10. Expediency in Taxation Fiscal cersiu Socio-Political 
 Theory Progressive Rate as Criterion of Taxation for 
 Reform Purposes 824 
 
 11. Productiveness of Tax Convenience and Certainty Dis- 
 crimination Freedom from Evil Effects .... 827 
 
 12. Administration of Tax Separate Valuation of Land and 
 Improvements DiflGiculties of Making Accurate Valuation 
 of Land 830 
 
 S IS. Present Method of Valuation compared with Scientific 
 
 Method 833 
 
 14. Hoffman-Neill Rule 885 
 
 15. Somers System of Valuation 837 
 
 16. Objections to Tax Confusion with Single Tax Relative 
 Expediency of Tax for Rural and Urban Communities 
 Most Expedient Form 841 
 
 CHAPTER Vm 
 
 THE TAX AS A SOCIAL REFORM 
 
 5 1. Problems for Inquiry Unearned Increment Speculation 
 
 in Land Housing Private versus Public Ownership . 848 
 
 2. Classification and Differentiation of the Three Kinds of 
 
 Land 349 
 
 S S. Agricultural Depression and Decline in Value of Rural Land in 
 
 Europe 851 
 
 4. Increase in Agricultural Land Value in the United States, 
 
 Australasia, Canada 854 
 
 $ 5. Fluctuations in Value in above-mentioned countries Con- 
 clusions and Tendencies 855 
 
 S 6. Infiuences affecting the value of Urban Land Examples of 
 
 Increments in Urban Land Value 858 
 
 7. Decrements and Causes of Decrements in City Real Estate 
 
 Value 864 
 
 8. Mines and Forests Problem of Conservation Illustrations 
 
 of Wastefulness The Value of Minerals and Timber . 866 
 
 9. Summary: Differences between the Three Kinds of Land and 
 
 N. in Problems they present 868 
 
 N. "^ 10. Definition and Peculiarities of Land Speculation . . . 870 
 ^ 11. Changes in the Character of Land Speculation Less Op- 
 portunity than formerly 872 
 
 12. Real Estate Companies Their Methods of Speculation 
 
 Suburban Building Operations 875 
 
 " IS. The Withholding of Land from Utilization Extent of Prac- 
 tice Taxation on Capital Value as a Check .... 878 
 
 14. Results of Indebtedness due to Overcapitalization of Real 
 
 Estate Loss Through Foreclosure 882 
 
 S 15. Conclusions concerning Speculation in Land .... 884 
 
 ^
 
 \ 
 
 > 
 
 liv CONTENTS 
 
 CHAPTER IX 
 
 THE TAX AS A SOCIAL REFORM {concluded) 
 
 1. Far-Reaching Effects of Housing Conditions .... 388 
 
 2. The Slums in Large Cities Congestion 890 
 
 3. Causes, Economic and Social 891 
 
 4. Relation between Housing and Rents Building and Sanita- 
 tion Legislation and Regulations Effect on Rent Ele- 
 ments entering into Ground and Building Rents . . . 392 
 5. Putative Effects of the Tax on Congestion Deductions by 
 
 the Adherents 895 
 
 5 6. Deductions by the Adversaries 398 
 
 7. Actual Effects of Tax on Rent, on Building, on Speculation . 402 
 8. Public Ownership as Means of suppressing Abuses arising from 
 
 Speculation in Land 404 
 
 S 9. Need and Expediency of the Nationalization of Agricultural 
 Land The Efficacy of Tax on Land Value in the Disinte- 
 gration of Large Estates 406 
 
 10. Need and Expediency of the Public Appropriation of Urban 
 Land Experiments in Municipal Housing Schemes 
 Expediency of Public Appropriation of Part of the Incre- 
 ments from Urban Land Value 409 
 
 5 11. Public Ownership of the Natiu*al Resources Tendency to- 
 ward Monopolization Problem of Conservation . . 415 
 12. Failure of Tax as a Vital Social Reform Measure . . . 420 
 
 CHAPTER X 
 
 EXPEDIENCY OF THE TAX ON LAND VALUE FOR 
 THE UNITED STATES 
 
 1. Fiscal Needs in the United States Inquiry confined to Direct 
 
 Proportional Tax for Local Piuposes 422 
 
 2. Tendency of Expenditure of Local Bodies to increase . . . 424 
 8. Inadequacy of General Property Tax Evasion and other 
 
 Consequences 427 
 
 4. Evils of Underassessment Causes and Remedies . . . 428 
 5. Constitutional Barriers to Reform in Taxation Progress 
 toward Reform Inadequacy of the " Classification of 
 
 Property" Reform 431 
 
 6. Tendency toward Separation of State and Local Taxation 
 
 Local Option as Result 438 
 
 7. Local Option in Taxation Meaning Dangers Ef- 
 fects 485 
 
 8. Administrative Changes Fundamental in all Proposals . . 489 
 9. Proposed Reforms in Local Taxation Their Relative Ex- 
 pediency ..... 442
 
 CONTENTS XV 
 
 10. Positive Effects of Tax on Land Value as Justification of 
 
 Change 445 
 
 11. Probable Distribution of Burden by the Tax on the Land- 
 owners 448 
 
 S 12. Summary of Recent Legislation with respect to Exemption of 
 Improvements in American Cities Causes and Trend of 
 Movement 460 
 
 BIBLIOGRAPHY . . 461 
 
 INDEX 485
 
 THE TAXATION OF LAND VALUE 
 
 CHAPTER I 
 
 THE TAX ON LAND VALUE 
 
 1. The problems of tapping new sources of public 
 revenue and of improving the present systems of taxation 
 tend to grow more and more vital. The reason is patent. 
 Public expenditures are increasing enormously because of 
 the socializing tendencies of the government. Especially 
 in urban communities where the social welfare spirit has 
 taken root, the disbursements for public utilities, for cul- 
 tural and recreational facilities, as well as for public safety 
 and sanitation, claim a greater percentage of the budg- 
 etary requirements from year to year. When we inquire 
 what constitute the taxable sources to meet the growing 
 budgets in most American cities, we find some form of the 
 property tax, supplemented by the franchise, corporation, 
 business, or similar taxes. But since, for purposes of taxa- 
 tion, personal property is as elusive as the will-of-the-wisp, 
 the burden falls mainly on real property.^ And under the 
 present defective system of valuation and assessment, this 
 burden, it will be agreed, is most unequally distributed. 
 Under these circumstances the discussion of the tax on 
 land value, which has been proposed as a substitute, or as 
 supplementary to the property and other taxes, is oppor- 
 tune. 
 
 * In most American cities from seventy per cent to about ninety-five 
 per cent of the general property tax is derived from real estate, accord- 
 ing to an estimate made from Table 34 of the Special Report of the Bu- 
 reau of the Census. Financial Statistics of Cities Having a Population of 
 over 30,000, 1909. For example in Brooklyn, New York, more than 
 ninety-eight per cent of the taxes was in 1895 derived from this source. 
 Cf. Seligman, Essays in Taxation (1913), p. 25.
 
 2 THE TAXATION OF LAND VALUE 
 
 2. In recent years the taxation of land value has taken 
 on a signification somewhat different from its literal mean- 
 ing. Literally land has always been taxed on its value. 
 Even in the taxation of land according to acreage, e.g., 
 the danegeld or scutage,^ we perceive an attempt, though 
 a crude one, to value the land. And in this country there 
 is no more prolific source of local revenue than the land, 
 which is legally and supposedly assessed on its market 
 value. Nor can "land value" mean only the full market 
 or capital value, '^ for there are a few cities and counties 
 e.g., Suffolk County, Massachusetts which claim to 
 tax land on its actual value; nevertheless, in the modern 
 denotation of the phrase the tax on land value does not 
 exist in these communities.' 
 
 The distinctive characteristic of the tax is not alone that 
 it is levied on the actual selling or capital value, but that it 
 is levied on the unimproved value, on the site irrespective 
 of the value of the buildings and other improvements 
 thereon. In other words it is a discriminatory tax on land. 
 Though of comparatively recent origin the tax has al- 
 ready assumed various forms, the heterogeneity of which 
 will be gathered from the following. Recently the cities 
 of Pittsburg and Scranton were probably taken aback 
 by the newspaper pronouncement that the tax on land 
 value had there been unwittingly instituted. That is, the 
 Stein bill,* which became a law May, 1913, provides for 
 
 * Thus the scutage was a charge on the knight's fee corresponding to 
 20, annual value, a rough estimate of the value of the land. CJ. Dowell, 
 History of Taxes and Rates in England (1888), vol. i, p. 4fO. 
 
 * By capital value of land is meant the sum which the land might be 
 expected to realize at the time of valuation if offered for sale on such rea- 
 sonable terms and conditions as a bona fide seller might be expected to 
 require. 
 
 * In fact the question of full value assessment as an administrative 
 improvement is at present receiving the attention of many state legisla- 
 tures with the prospect of adoption, yet no country is more reluctant 
 than ours to institute the taxation of land value. 
 
 * Pennsylvania H.R. Bill 967 (1913), approved May 15, 1918.
 
 TBGE TAX ON LAND VALUE 8 
 
 the gradual reduction of the tax on buildings in the sec- 
 ond-class cities of Pennsylvania. This, however, is an 
 example of only partial taxation on land value. The study 
 of the subject makes evident the existence of the system: 
 (1) in Australasia, in the tax on the unimproved value of 
 the land and the exemptions of improvements; (2) in West- 
 ern Canada, in the municipalities where improvements 
 have in recent years been wholly or in part exempted from 
 taxation; (3) in Germany, in the shape of the value-incre- 
 ment tax; (4) in Kiao-chau, where besides a value-incre- 
 ment tax of thirty-three and a third per cent, a six per cent 
 tax is levied annually on the value of the site; and (5) in 
 England, in the form of the land-value duties comprising 
 the increment, reversion, the undeveloped land, and the 
 mineral rights duties. The protean character of the tax 
 is thus evident. 
 
 The discriminatory feature of the tax raises the ques- 
 tion of its raison d'etre, the analysis of which is as essential 
 to the understanding of the system as the mode of levy it- 
 self. If we analyze the criticism and speculation which 
 the introduction of the above taxes has evoked, we find 
 misapprehension and confusion of thought. By some, for 
 example, the English Lords, ^ it is regarded as an attack 
 upon private property rights; by others, such as Adolph 
 Wagner and the "Kathedersozialisten," ^ as a protest 
 against the accumulation of wealth, especially of the "un- 
 earned increment," in the hands of a few; by others, 
 Adickes,' for example, as a tax on special benefit, or a 
 special assessment; by still others, including the general 
 
 * See Parliamentary Debates of Commons and Lords (1909-10). Also 
 <jf. infra, chapter v, 1, 5. 
 
 ' Many American professors of economics so regard the tax, e.g., 
 H. J. Davenport. See "Extent and the Significance of the Unearned 
 Increment," in Bulletin of the Am. Ec. Assoc. (1911), ser. 4, vol. i, pp. 
 S22/. 
 
 * Mayor of Frankfurt a. M. Like many German officials, he approved 
 of the " Wertzuwachssteuer" because of its expediency. Cf. infra, chap- 
 ter IV, 9.
 
 4 THE TAXATION OF LAND VALUE 
 
 American public,^ as the Single Tax in disguise, i.e., the 
 entering wedge to the Single Tax; while to others, notably 
 B. Marsh,2 it is merely a fiscal measure, an improved 
 method of local taxation, to replace or supplement the 
 realty tax. Which is the correct interpretation? Or is 
 there a common ground of agreement among them? 
 
 To disclose the essence of this tax and its raison d'etre 
 in the face of this heterogeneity of conception is the first 
 purpose of this monograph; the further purpose is to dis- 
 cuss the expediency of its enactment from a study of the 
 actual operation of the tax as well as of its underlying 
 principles. 
 
 3. A study of the above-mentioned systems shows 
 
 that not alone in method of assessment and levy, but also 
 
 in their rationale great differences exist. From both these 
 
 standpoints therefore, tentative definitions of the tax 
 
 on land value will be attempted, comprising not so much 
 
 the systems in operation, as the hypothetical ideal common 
 
 to those systems. 
 
 /^ From the fiscal standpoint, the tax on land value to be 
 
 I herein discussed is levied on the realized, or anticipated, 
 
 \ capitahzed income ' accruing from the site, distinct from 
 
 J all structures and other improvements upon it. Thus the 
 
 ^tax presumably falls on economic rent, the basis for the 
 
 y assessment being either the market value of the land, or 
 
 ( its realized, or potential, annual rental.* The pith of the 
 
 * The writer has in mind the vehement opposition to the adoption of 
 the tax in Oregon, Washington, and Missouri. Cf. infra, chapter x. 
 
 * Taxation of Land Values in American Cities (1911). 
 
 * In only a few cases, e.g., the English mineral rights duty, the rental 
 is made the basis of the tax, but in these cases the rental bears an arbi- 
 trary ratio to the capital value. In the English mineral rights duty, for 
 example, the income is assumed to be two twenty-fifths of the capital 
 value. 
 
 * The annual rental is not always the criterion of the capital value of 
 the land. This will become evident when the English rating system is 
 discussed in chapter v. Whether the selling value, the net, or gross rental 
 is the proper taxable basis involves a subtle distinction important only 
 from an administrative standpoint. See chapter vii, 7.
 
 THE TAX ON LAND VALUE B 
 
 system from the standpoint of taxation is contained in 
 tlie following principles: first, all land, whether utilized or 
 undeveloped, whether yielding a rental at the time or not, 
 shall be taxed at its full value, which shall be ascertained 
 by expert assessors according to a scientific system of valu- 
 ation; secondly, in accordance with the theory of the tax, 
 all improvements and buildings shall be exempted from 
 taxation.^ This is its essence; the actual methods will be- 
 come clearer after considering in the next section the vari- 
 ous forms of assessment and levy. 
 
 The rationale of the tax is fourfold, ethical, economic, 
 social and fiscal. 
 
 (a) The ethical justification of the tax is founded on the 
 conception of the "unearned increment." The r61e played 
 by the doctrine of the "unearned increment" as funda- 
 mental in the taxation of land value is well known. The 
 term first employed by John Stuart Mill and based on the 
 Ricardian theory of rent has been perpetuated by the 
 Single Taxers. In recent years, however, when the phrase 
 is stretched by economists to include surpluses other than 
 those accruing from land, the term has assumed a different 
 meaning. Value increments accruing from the land are re- 
 garded as created through certain social forces^ and, 
 
 * It will be found that these requirements, namely expert valuation 
 and exemption of improvements, are implied, if not existent in all the 
 forms of the tax to be discussed. This is true of the value-increment duty 
 as well (see infra, 5). Practically, however, whenever the rate of tar, 
 or the percentage of assessed value of the site exceeds that of the improve- 
 ments the principle of the tax on land value may be said to be in force. 
 
 ' To the argument that the value of all wealth is dependent upon social 
 influences, and that value increment accrues from other forms of wealth 
 besides land because of social causes, and not because of individual 
 effort, the reply is given that whereas competition prevents abnormal 
 profits falling to the capitalist and laborer, land is a monopoly by virtue 
 of which the value of the land, increasing with the population and indus- 
 trial development, accrues to the owner of the property right. All other 
 artificial monopolies, moreover, are said to have their root in this mo- 
 nopoly of natural resources. Cf., for example. The Public, September 12, 
 1913, pp. 8C8jf.
 
 6 THE TAXATION OF LAND VALUE 
 
 therefore, it is thought, rightfully belong to the commun- 
 ity as a whole. Since land is a gift of nature, and its value 
 is not attributable to individual effort, the private appro- 
 priation of such value, it is argued, is ethically unjustifi- 
 able. On this basis of the distinction between what is 
 socially created and what is privately earned rests the 
 chief argument of the advocates of the tax on land value. 
 " (6) But this ethical consideration does not appear sep- 
 arately; the economic factor is ever present. Indeed the 
 phenomenon, "unearned increment," arises and can be 
 formulated only when scarcity appears, that is, where 
 economic equality is prevented either by the natural 
 scarcity of the commodity or through legal limitation. 
 Take the duty on undeveloped land or the super-assess- 
 ment tax in Canada as examples: their object is to prevent 
 the holding of land for speculative purposes. The duty, 
 in other words, puts a premium upon improved land. 
 For instance, when the owner of vacant lots in the vicinity 
 of improved land receives a heavy tax bill on property 
 which yields him no income, he is tempted either to sell, 
 or to utilize the site himself. 
 
 (c) To the ethical and economic considerations should 
 be added the social justification which was largely respons- 
 ible for the adoption of the tax in Australasia and in 
 Canada: namely, to discourage large land holdings and 
 absenteeism. Viewing the land question in these coun- 
 tries as less urgent than in European countries we prefer 
 to regard this influence as social rather than economic. In 
 other words, it was a union of political forces against an 
 unpopular class. Further, the new "social-service" view- 
 point, as exemplified in the theory of "socially created 
 increment value," seeking by means of social welfare and 
 public service institutions to level down the economic in- 
 equalities among the social groups, has exerted an influence 
 in calling the tax into existence. 
 
 (d) However much these causes may have been instru-
 
 THE TAX ON LAND VALUE 7 
 
 mental in promoting the institution of the tax for imperial 
 or state purposes, they nevertheless do not appear to have 
 determined the raison d^etre of the local systems. In the 
 new communities of Australasia and Canada, where the 
 value of the land tends to rise rapidly with the influx of 
 immigrants, and where land constitutes the chief source 
 of wealth, the tax on the unimproved value of the land has 
 been found fiscally preferable to the tax on capital, which 
 is scarce and the accumulation of which it is desirable to 
 encourage. It will appear, indeed, that while the tax for 
 other than local purposes owes its origin chiefly to the 
 social, economic, and ethical considerations, the local taxes 
 on land value are predominantly fiscal in character.^ 
 
 4. Having defined and explained the rationale of the 
 tax on land value, it is necessary to point out the various 
 forms which the tax from the standpoint of administra- 
 tion has assumed : 
 
 1. Direct levies: 
 
 (o) Proportional taxes; 
 
 (1) general; 
 
 (2) specific: undeveloped land, mineral rights, 
 timber land; 
 
 (6) Progressive taxes; 
 
 2. Indirect levies: 
 
 (a) Proportional; 
 
 (1) value-increment duty (England) ; 
 
 (2) reversion duty; 
 
 (b) Progressive; 
 
 value-increment duty (Germany). 
 Direct ^ taxes are periodically recurrent, that is, collected 
 
 * A possible exception is the German municipal "Wertzuwachssteuer" 
 whose origin is discussed infra, chapter rv. 
 
 * The words "direct" and "indirect" as applied to taxes are here em- 
 ployed in a different sense from the customary one based on the incidence 
 of the tax, the tax being direct if levied immediately on the ultimate 
 bearer of the charge, and indirect if shifted by the immediate payer to 
 the consumer, as in the case of commodities. For authority for the other
 
 8 THE TAXATION GF LAND VALUE 
 
 annually according to a general assessment; while indirect 
 taxes are charged on stipulated occasions, i.e., at the time 
 of a sale or lease, or upon the death of the owner; in other 
 words, whenever a transfer of property occurs. The latter 
 may be paid in the form of a stamp tax at the time the 
 'land is transferred by a deed of sale, or by a lease. By gen- 
 eral proportional "^ tax is meant one imposed annually on all 
 land at a uniform tax rate. We shall find this system in 
 vogue for local purposes in those English-speaking com- 
 mimities ^ where the tax is in operation. When a scale of 
 rates increases directly with the greater value of the land 
 in addition to the ordinary charge on land, we have what is 
 known as the progressive or graduated land tax. Thus in 
 some cases, to the proportional levy of Id. in the pound of 
 the capital value, may be added a scale of rates, e.g., ^^d. 
 rising to M. on the capital value of estates ranging from 
 5000 to 200,000. This scale will be found levied es- 
 pecially for state and federal purposes,' in some cases as a 
 super-tax, that is, in conjunction with the ordinary rate as 
 in the above assumed illustration; in others as the princi- 
 pal levy without the ordinary rate. 
 
 The specific direct taxes are those levied on unim- 
 proved, timber, or mineral land. Whether imposed in 
 conjunction with other forms of the land tax or as a sep- 
 arate levy, the specific tax is intended as an especially dis- 
 criminatory land charge. This characteristic of the tax on 
 unimproved land, for example, is shown by the methods 
 of levy. Thus, undeveloped land may be subject to a rate 
 
 usage of the terms see Eheberg, Finanzvnssenschaft (1911 ed.), PP- 204-05; 
 also cf. Bullock, "Direct and Indirect Taxes" in Pol. Sci. Qiiart., vol. 
 XIII, pp. 463-65. 
 
 ^ "Proportional" is used in its technical sense of uniform rate for all 
 property or income regardless of the amount of taxable value. In Pro- 
 fessor Seligman's terms, "a tax is proportional when the mathematical 
 relation between the amount of the tax and of the thing taxed remains 
 the same." "Progressive Taxation in Theory and Practice," in Am. Ec. 
 Assoc. Quart., vol. ix, p. 565. 
 
 * In Australasia and Canada. * Characteristically in Australasia.
 
 THE TAX ON LAND VALUE 9 
 
 one hundred per cent higher than that on improved land;* 
 or unimproved land may be assessed at a value twenty-five 
 per cent higher than its selling price; ^ or a rebate from part 
 of the tax may be allowed the owner of improved land.' 
 
 Distinguished from the direct taxes are those collectible 
 on certain occasions of transfer of property. As in the case 
 of the direct taxes, the two types, namely, the propor- 
 tional * and the progressive,^ occur also as indirect levies. In 
 the case of the duty on value increment, i.e., the difference 
 between the value of the land on the occasion of levy and 
 its value on a previous occasion, the tax is collectible, as 
 already stated, at the time of a transfer of property, either 
 by sale, lease, or at death.' The occasion for the collection 
 of reversion duty ' is at the termination of a lease, when 
 the property reverts to the owner. In all other respects 
 the reversion duty is a value-increment duty. As the na- 
 ture of the assessment for computing the tax is complex 
 and unique, an attempt will be made in the following sec- 
 tion to describe and illustrate the system of taxing the 
 value increment. 
 
 5. The progressive tax on value increment, the 
 "Wertzuwachssteuer," is essentially of German origin. In 
 common with the other forms of the tax, it aims to appro- 
 priate a portion of the surplus or differential value of the 
 land in behalf of the conmiimity; in the method of proce- 
 dure, however, it is different from the direct levies. First, 
 the direct tax collects its share of the value in annual in- 
 stallments; the tax on value increment collects a lump sum 
 
 * In the German municipalities. 
 
 * The super-assessment tax in Canada. 
 
 ; The Western Australian State tax. * In Kiao-chau and England. 
 ' In Germany for both imperial and local purposes. 
 
 * There is only one more occasion for the levy of value-increment 
 duty. That is the arbitrary occasion created, as we shall see, in the Eng- 
 lish Act for taxing corporations, namely, in 1914, and every subsequent 
 fifteenth year. See infra, chapter v. 
 
 ' Characteristically Englbh, for it is in England that the leasing sys- 
 tem is most prevalent.
 
 "/ 
 
 10 THE TAXATION OF LAND VALUE 
 
 on the particular occasions mentioned above. Secondly, 
 QflriSiiBBiHMiHihiianpov^MMe, the tax on value increment 
 falls only on the surplus, or as its name implies, on the 
 value increment, not on the whole capital value. The 
 government, therefore, claims a part of the owner's profit 
 arising from the appreciation in the value of the land. 
 
 The method of valuing the increment is as follows: 
 When a piece of property on which duty is chargeable is 
 sold or leased, its selling price (in case of a lease, its ap- 
 praised price) is compared with its purchase price, i.e., the 
 selling price at a previous transfer when duty was paid; 
 and the differential of the present price over that previous 
 price constitutes the increment upon which duty is im- 
 posed. Two selling or appraised prices, then, must be 
 known before the amount of appreciation can be com- 
 puted. A moment's reflection makes it clear that the tax 
 may be retroactive. In the German laws, in order to com- 
 pute the tax the first time it is levied, an arbitrary ap- 
 praisal value has in most cases been fixed. This is called 
 the "original site value," and is ascertained for an arbitrary 
 date stipulated in the bill.^ To illustrate, the "Wertzu- 
 wachssteuer" in Breslau went into effect on June 23, 1907. 
 The bill fixed January 1, 1895, as the time for which the 
 original site value should be computed. If, then, in De- 
 cember, 1907, a lot was sold in Breslau for 15,000 marks 
 which had been worth on January 1, 1895, 9000 marks, 
 duty would have been charged on the difference in the 
 prices, or on 6000 marks. Suppose, now, that in 1910 the 
 same piece of land changed owners and its selling price was 
 then 16,000 marks, the duty would be collected on 1000 
 
 ^ The details of this method of computation will be found infra, chap- 
 ters IV and V. It may be here noted that while the German tax is with 
 few exceptions retroactive, falling on the value increment that has ac- 
 crued in the past, the English bill seeks to appropriate part of the future 
 increment only; the latter bill provides for a valuation of all the land at 
 the time of the enactment of the law, in this way establishing the original 
 site value.
 
 THE TAX ON LAND VALUE 11 
 
 marks. ^ In case of a depreciation in price, of course no 
 tax is levied. Thus, if the price of the lot in 1910 had re- 
 mained 15,000 marks or had fallen below this amount no 
 increment duty would have been collectible. It is need-_ 
 less to repeat that, as in the other taxes on land value, the 
 value of the improvements and buildings would have been 
 deducted before the value increment was ascertained. 
 
 From this brief analysis it will be observed (1) how 
 different the modes of assessment are, and (2) how het- 
 erogeneous are the forms which the tax on land value 
 has assumed. It will further be observed that several 
 forms may coexist in the same community. The best illus- 
 tration of this protean tax is to be found in the English 
 system which comprises four separate duties on land. To 
 define further the distinctive character of this tax it will 
 benecessary to differentiate it from other land taxes. 
 
 6. The pivotal distinction between the land-value tax 
 and the other land taxes lies in the theory of incidence. 
 In accordance with this theory, the only tax on land which 
 cannot be shifted is one which falls on economic rent; such 
 a tax is that on land value. 
 
 Regardless of this theory of incidence, the earliest sys- 
 tem of land taxation made area the basis of valuation, 
 e.g., the scutage or danegeld. In such taxes the rent, or 
 income-bearing capacity of the land, is ignored. Survivals 
 of this crude system are to be met with even to-day.^ 
 Later, product, or fertility, superseded area as the basis 
 of assessment, e.g., in the "taille," or tallage. Product, 
 however, theoretically represents wages, interest, profit, 
 as well as economic rent. Hence this form of the land tax 
 
 * The system of assessment is more complicated because of a minimum 
 exemption, of the deductions and additions to the selling prices, etc. CJ. 
 infra, chapters iv and v. 
 
 * Even yet instances occur where area is made the basis of assess- 
 ment. In Greece, for example, land is taxed according to area. Cf. Bas- 
 table. Public Finance (1895), p. 406. Also in Alberta, Canada, land is 
 subject to a provincial tax based on area. Cf. State and Local Taxation, 
 Second Conference of the International Tax Association (1908), p. 299.
 
 12 THE TAXATION OF LAND VALUE 
 
 does not satisfy the requirements of the discriminatory 
 tax on land, the so-called tax on land value. 
 
 Another land charge which should be distinguished 
 from the tax on land value is the apportioned land tax. 
 As its name implies, the amoimt of revenue expected to 
 accrue from its levy is apportioned by the central govern- 
 ment among the subordinate taxing jurisdictions, each of 
 which becomes responsible for the collection of a quota 
 determined by the assessed value of the land at the time 
 of apportionment. Now, were the tax frequently reap- 
 portioned in accordance with periodic "cadastral" valua- 
 tions, and were the assessment made on the actual selling 
 Drice of the land,^ the tax would fall on the value of the 
 1 land. As a matter of fact, however, apportioned taxes 
 / become fixed charges, the same quota being paid to the 
 central authority irrespective of the changes in the value 
 / of the land due to the progress or retrogression of the dis- 
 / trict.2 Thus the English land tax (instituted as far back as 
 I 1692) has yielded an almost constant sum, less than one 
 milHon pounds, for about a century, in spite of the enor- 
 mous appreciation in the value of the land during that 
 time. Such taxes practically become permanent rent 
 charges. 
 
 The prevailing form of land taxation to-day is the tax 
 OH real property. Whether we consider the English system 
 of rating on rental, or the real estate tax on selling price in 
 this country, they differ from the tax under consideration 
 in their failure to accept the principle of exempting build- 
 ings and improvements, and in the system of assessment. 
 As ordinarily levied, the tax on real property is character- 
 ^ ized as follows: 
 
 JC (1) Unused land is generally assessed at a lower value 
 y^V j^than the surrounding improved sites; thus a premium is 
 
 (/^\ "* ' * More often not rent but product formed the test of value. 
 
 * Such taxes may, as happened in England under Pitt's redemption 
 scheme, be redeemed by the payment of a lump sum representing the 
 capitalized value of the tax. 
 
 I
 
 land under the realty tax is rarely assessed at its full market 
 
 value. Although this is a matter of common knowledge, ,-.. ^ 
 
 THE TAX ON LAND VALUE 18 
 
 given to the owners who for speculative purposes hold land 
 out of use. 
 
 (2) Largely because of the crude methods of assessment, 
 
 the following statistics showing the extent of under- 
 assessment are significant. Summarizing the data pre- 
 pared by S. Wolff ^ from the Census Bureau Reports, real 
 property was assessed on an average in four of our states 
 at from fifteen to twenty-three per cent of its actual value, 
 in eight states at from thirty to forty per cent, in thirteen 
 states at from forty -one to fifty per cent, in seven states at 
 from fifty-two to sixty per cent, in five states at from 
 sixty-two to sixty-nine per cent, in seven states at from 
 seventy-five to ninety per cent. Only one county in the 
 entire United States (Suffolk County, Massachusetts) had 
 its real estate assessed at its full estimated value. 
 
 (3) With few exceptions, ^ no provision is made in this 
 country for the expert valuation of land, so that the surplus 
 or value increment, which increases rapidly in progressive 
 communities, for long periods remains untaxed.^ It is 
 important to note that in view of this exemption of value 
 increment from taxation for long periods of time, the 
 burden of an increased rate of tax on realty is to some 
 extent compensated. In fact, granting the validity of the 
 principle of tax capitalization, whereby the capitalized 
 value of the tax is deducted from, or "absorbed" in, the 
 selling value of the land, under-assessment and inexpert 
 valuation reduce the burden of the tax to a minimum.* 
 For as a result of this "amortization," the tax on realty 
 ceases to be a tax in the proper sense of the word. 
 
 * Tirsl National Conference on State and Local Taxation (1907), p. 113. 
 ' Cf. infra, chapter vii, 12 jf. * See quotation infra, p. 14. 
 
 * Infra, chapter vn, 5. It seems very probable that the possibility 
 of the amortization of the tax, added to the Anglo-Saxon respect for pri- 
 vate property rights, is responsible for the defective administration of the 
 realty tax in this country.
 
 14 THE TAXATION OF LAND VALUE 
 
 7. Recently an improved system of taxing real es- 
 tate has been introduced in a few cities,^ with the purpose 
 of assessing property on its actual selling value. The im- 
 provement consists in the method of assessment and valua- 
 tion. To ascertain the full market value of the property a 
 scientific system of valuation has been devised, in accord- 
 ance with which the land is valued apart from the 
 improvements. It must be noted, however, that the im- 
 provements continue to be taxed at the same rate as the 
 site. As the system is in operation to-day, it varies from 
 the tax on land value, first, in that buildings and improve- 
 ments are not exempted from taxation; secondly, in that 
 the assessed value is kept below the selling price of the 
 property. Take New York City as an illustration. EflS- 
 cient tax administration has indeed made the tax on sell- 
 ing value in that city an object of commendation. ^ Yet 
 even there the assessment and valuation until recently 
 failed to keep pace with the enormous growth in the value 
 of the land. "The growth of the City of New York and 
 the great increase in realty values since that time (1903) 
 have been such that, in spite of the rapid marking up of 
 values at that time, the assessed valuation to-day, taking 
 the city as a whole, probably does not exceed seventy per 
 cent of the market value, and in many cases is not over 
 sixty per cent. A:yam4i;iatir>n <fHdbHbooksrfor^ifierent 
 parts of the city and for all classes of improvefiients, 
 whether business houses, private dwellings, or tenement 
 Jaouses, leads me to believe that the assessed valuations 
 ^f land lag about thirty per cent behind the extraordi- 
 nary rise in values which has occurred in the last three 
 
 1 Notably New York City, Newark, New Jersey, Houston, Texas, 
 Cleveland, Ohio. Cf. also Papers Bearing on Land Taxes and on Income 
 Tax, etc. (1909), Bril. Pari. Papers (Cd. 4750), pp. 92 jf., 106. Men- 
 tion should here be made of the attempt of about a dozen of our states 
 to assess the land separately from the buildings. See injra, chapter vil, 
 11; also State and Local Taxation (1907), p. 131. 
 
 See ibid., pp. 375/.; also (1908), pp. 237 jf.
 
 ^ 
 
 THE TAX ON LAND VALUE 15 
 
 years. In the case of unimproved property in many cases, 
 the assessment is about JBfty-five to sixty per cent of the 
 market value." ^ In the interest of uniformity, the tax on 
 land value proposes to take account of all the fluctuations 
 in the value of the land. 
 
 8. The association of the tax on land value with the 
 Single Tax is so prevalent and the consequences of this 
 association so serious that it is necessary to differentiate 
 between them. There is ground for the confusion of the 
 two. On the one hand, the opponents of the tax on land 
 value have prejudiced the public against it by identifying 
 this tax with the Single Tax; on the other hand, the Single 
 Taxers exult in the introduction of the tax on land value, 
 regarding it as the vindication of their theories, and as the 
 entering wedge to the Single Tax. 
 
 No one will dispute the fact that fundamentally they 
 ave something in common. Both, for example, stand for 
 an eflBcient, expert valuation system; both favor the ex- 
 emption of improvements from taxation; both insist upon 
 assessing and taxing land at its full value. -Neveilheless^M. 
 a s e nact ed 4o - da^, t he tax~on li31d~T:ritte-bear& no. closer 
 rf.]Qt;rtn t^>^h i c ^ fflgh. ^fax- thao. does ihe.i^cently enacted 
 parcels post system in the United States, for example, try 
 state sGciaKsm. England, for instance, with her vaiue- 
 increment duties is no nearer the Single Tax regime than 
 is this country with her pubUc utilities legislation hear 
 collectivism. 
 
 ^ First Conference on State and Local Taxation (1907), pp. 384-85. 
 Other authorities corroborate this estimate of undervaluation. Cf. 
 Papers Bearing on Land Taxes, etc. (Cd. 4750), pp. 95, 105. 
 
 Mr. Purdy, President of the Tax Commissioners of New York City, 
 nevertheless claims that the assessment in New York City represents the 
 full value of the land. There is abundant proof that, excellent as the 
 work of the commissioners is, their land-value assessment is not accu- 
 rately on the full value. (Cf. Cederstrom, Unjust Taxation, passim.) For 
 example, to make the accrued rental, so long as the value of the site is 
 less than the combined value of the land and building, the basis of com- 
 putation of the selling value of the land is not to attain an accurate full 
 value assessment. See Seventh Conference on State and Local Taxation 
 (1913), p. 264.
 
 ^r^^. 
 
 16 THE TAXATION OF LAND VALUE 
 
 / In distinguishing between the tax on land value and 
 the Single Tax, we are comparing a tax reform with a social 
 philosophy. The Single Taxers are not interested in the 
 tax as an adequate source of local revenue under existent 
 conditions; they would employ the tax as the weapon with 
 which to clear the way to their Utopia, the essence of which 
 is an ideal society based on an equality of opportunity. 
 The important, ultimate object of the Single Taxers of the 
 Georgean type is the nationalization of the land; the 
 method by which they propose to attain this object is 
 through a one hundred per cent tax ^ on the value of land. 
 In addition, these theorists claim that, with the enormous 
 income from the public domain in the hands of society, 
 the imposition of other taxes will be superfluous. In short, 
 the one hundred per cent tax on land value, and the aboli- 
 tion of all other taxes, that is, the institution of the Single 
 Tax, is merely the machinery necessary in the realization 
 of their Utopian society.'' Contrast this doctrine with the 
 slight tax on land value, adopted in part for fiscal pur- 
 poses, in part in the interest of social amelioration, e.g., 
 to relieve congestion in lu-ban communities, to prevent 
 ^speculation in land, and, on behalf of the community, to 
 appropriate a little of the enormous appreciations in the 
 
 ^ The writer is aware that the Single Taxers propose to leave the land 
 in the hands of individuals who will practically act as agents of the gov- 
 ernment and who will receive a small share of the land value about 
 five per cent or more as recompense. This, however, does not alter 
 the theory as interpreted above, for the Single Tax is primarily opposed 
 to the private appropriation of land value, hence of private property in 
 land. As to those moderate (limited) Single Taxers who, like C. B. Fille- 
 brown, would limit the Single Tax "to the needs of the state for an effec- 
 tive and economical administration of government," the theory remains 
 unaltered. C/. The A.B.C. of Taxation, p. 153. Moreover, the needs of 
 the state, as Shearman admits, are unlimited. Cf. Natural Taxation, pp. 
 133-34. 
 
 * It is interesting in this connection to note that Henry George him- 
 self regarded the nomenclature "Single Tax" as a misnomer. Mr. 
 George's son, in the Life of Henry George, says in a footnote (p. 496), 
 "Mr. George never regarded the term as describing his philosophy, but 
 rather as indicating the method he would take to apply it."
 
 THE TAX ON LAND VALUE 17 
 
 value of the land, to meet the growing budgets. Nor is ^ 
 the difference between them one of degree, merely; the ( 
 doctrine of abolishing all taxes is as foreign to the princi- \ 
 pie of the tax on land value, as is the confiscatory feature C 
 of the Single Tax. W 
 
 Having thus attempted to epitomize a complex system, 
 it is necessary to show to what extent it is prevalent. 
 
 9. Mention has incidentally been made of the several 
 countries where the tax on land value is in operation. As 
 early as 1873 the Canadian province of British Columbia 
 enacted a wild-land tax, a duty on unimproved land. This 
 tax is in force to-day. New Zealand, the pioneer in social 
 reform legislation, in 1878 passed a measm-e taxing the 
 unimproved value of the land. But the act was repealed 
 in the following administration, and it was not until the 
 nineties that the system was reintroduced into New Zea- 
 land and instituted in Australia. Since then the tax has 
 gained a foothold in numerous Australasian municipali- 
 ties, in its several states, and, in 1910, was made part of the 
 federal revenue system of the Commonwealth of Australia. 
 
 An interesting experience with the tax on land value, in- 
 stituted in 1898, is furnished by Kiao-chau, the German 
 province in Asia. In Germany, the duty on value incre- 
 ment was first incorporated in the fiscal policies of numer- 
 ous municipalities, Frankfurt a. M. taking the lead in 
 1904. According to Adolph Damaschke,^ 652 local gov- 
 ernments in Germany had by 1911 adopted the tax. The 
 " Reichszuwachssteuer," the imperial tax, went into effect 
 April 1, 1911. 
 
 In England, by the enactment of the "Finance Act, 
 1910," the new duties on land value became law. Turning 
 to Canada, besides the wild-land taxes, a number of local 
 authorities, notably Vancouver and Edmonton, have 
 recently revised their realty taxes, so that they not only 
 axe taxes on land value, but constitute practically the sole 
 * "Geschichte der Nationaldkonomie," p. 649 (Sth ed.).
 
 18 THE TAXATION OF LAND VALUE 
 
 source of local revenue. It has long been customary in 
 these and other communities of the western provinces to 
 assess the improvements at a lower percentage valuation 
 than the sites. It is noteworthy, not only that the number 
 of municipalities which exempt improvements is increas- 
 ing, but that in Alberta and Saskatchewan general pro- 
 vincial regulations have been enacted providing for the 
 taxation of land value for local purposes, thus assuring the 
 extension of the tendency in that country to rate on land 
 value. 
 
 10. Summary: It will be observed that the tax on land 
 value is of comparatively recent origin. And to judge from 
 its protean character, it seems to have had a spontaneous 
 growth. That is, the tax was no theory or scheme of defin- 
 ite form and shape, so to speak, taken over as a whole by 
 this or that country. It would appear rather that the form 
 or forms of the tax which were adopted in the several 
 countries were those that seemed to be most suited to the 
 needs and conditions of the community. That this was 
 actually the case will be seen from the following chapters, 
 in which the causes for the introduction of the tax in the 
 various coimtries will be considered. The following chap- 
 ters will also attempt to explain the nature and the work- 
 ing of the systems in detail, and to clear up the complexi- 
 ties resulting from the numerous methods of exemptions, 
 assessment and rates.
 
 CHAPTER II 
 
 LAND TAXES IN AUSTRALASIA' 
 
 1. To Australasia the Western world owes among 
 numerous experiments in social science the system of taxa- 
 tion on the unimproved value of land. Although we have 
 much to learn from an experience extending over several 
 decades, caution must be exercised in our conclusions re- 
 garding the expediency of the tax for countries trammeled 
 by tradition, precedent, slowly evolved social institutions, 
 social classes, and other frictional forces. In respect to 
 the problem in hand, for example, the attitude of the 
 colonists toward land monopoly which has been created 
 and fostered in their own generation, through laws for 
 which they were themselves responsible, must be unlike 
 that of their mother country toward an institution cen- 
 turies old, upon which the very aristocracy and military 
 glory of the country are founded. Thus, the confiscation 
 of the " unearned increment " has less terror for those who 
 have themselves bestowed the right or privilege to it.^ 
 Thus, too, it becomes comprehensible how an Anglo- 
 Saxon people, with the deepest respect for private prop- 
 erty rights, could embody in a recently proposed Land 
 Bill ^ a clause limiting the ownership of land by an indi- 
 vidual to the value of 50,000. This absence of institu- 
 tions sanctioned by tradition is largely responsible for the 
 progressive social legislation in Australasia. The untram- 
 
 * The Treasurer General of New Zealand, Mr. Ballance, was quoted 
 as saying during the campaign of 1878 that it would be right to tax away 
 the whole unearned increment. CJ. New Zealand, Pari. Debates (1878), 
 vol. xxrx, p. 21. 
 
 * In a bill proposed in New Zealand, 1906, "It is made unlawful for 
 any one to own more than 50,000 worth of land (unimproved value)." 
 The Australasian, vol. Lxxxi, September 22, 1906, p. 689.
 
 20 THE TAXATION OF LAND VALUE 
 
 meled character of the colonists is, in fact, the key to their 
 land laws, including the land tax. 
 
 2. Bearing in mind this unique attitude of the colonist 
 toward the institution of landed property and his free- 
 dom to make and unmake laws,^ we need only understand 
 the needs growing out of the conditions of land tenure in 
 Australasia to perceive the chief cause of the taxation of 
 land value. The all-important problem which continues 
 to confront the colonies is how to attract settlers. In 
 the early history of the new country a sound land pohcy 
 was of secondary importance. And since, as is well known, 
 the bait that lures the venturesome to a newly opened 
 continent remote from civilization is the possibihty of 
 becoming "land rich," ^ the inducements offered by the 
 government at first were chiefly in the form of land grants 
 and orders from the Crown.' The futility of this policy 
 soon becoming apparent, systems of pm-chase and lease- 
 hold were devised, all of which, however, failed to prevent 
 the wholesale alienation and concentration, in the hands 
 of comparatively few settlers, of large portions of first- 
 
 * Cf. Vigouroux, L' Evolution Sodale en Australasie (1902), pp. 417-18. 
 
 * "Are we not afflicted with a land-grabbing mania, an earth hunger"? 
 Cf. The Australian Economist, vol. i. May, 1888, p. 52. "What allures 
 the one immigrant whom we care to welcome? The hope of settling on hia 
 own land in fee." The Australasian, June 20, 1874, p. 776. 
 
 * This system of free grants continued until 1831 when it was sup>er- 
 seded by the sale of land at auction. The minimum price was at first 
 fixed at Ss., but was increased later to lis., then to iOs. per acre. The 
 terms of payment were liberal and selection of the land by the purchaser 
 before siu-veying was freely permitted. According to the later restrictive 
 policies the maximum amount of country land that could be held by any 
 one individual was, speaking generally, from 640 acres of the first-class, 
 agricultural land to 5000 acres of pastoral, or third-class land. Besides the 
 alienation by grants, squatter sovereignty and sales, a system of leasing 
 for short as well as for perpetual teniu-e, subject to certain conditions of 
 actual residence on the land was devised. To-day the systems of perpet- 
 ual lease and of lease-in-perpetuity are much in vogue in the colonies. 
 For a full and valuable study on the land tenure in Australasia see Epps, 
 Land Systems of Australasia (1894), Also cf. Reeves, State Experiments 
 in Australia and New Zealand, vol. i; Official Year Book of the Common- 
 wealth of Australia (1901-11); New Zealand Offi^d Year Book (1909).
 
 LAND TAXES IN AUSTRALASIA 21 
 
 class land in each of the colonies, "to the great embarrass- 
 ment of the late comers." ^ 
 
 The following illustrations of the wholesale alienation of 
 the land throw light on the lax policies of the government, 
 and on the existent conditions of land tenure in the colo- 
 nies. We read that in New South Wales one million acres 
 were transferred to a single company at the rate of 18d. 
 an acre.^ In the middle of the nineteenth century, one 
 squatter occupied for a 10 Ucense more than one mil- 
 lion acres. Again, in 1890, there were in this colony 121 
 freehold estates of over 40,000 acres each (comprising 
 11,219,484 acres). ^ In New Zealand thirteen holders oc- 
 cupied 165 runs, covering over 2,500,000 acres.* In an 
 address before the convention of the Australian Workers* 
 Union, in 1915, the following figures were presented to 
 show the extent of the concentration of land holdings in 
 Australia: 95 persons were in possession of 8,418,308 
 acres; 361 of 10,408,407 acres; 689 of 9,514,769 acres; 
 1567 of 10,754,656 acres. The holdings of these 2712 per- 
 sons therefore comprised 39,096,140 acres.^ 
 
 ^ "The frontages have been alienated, the riparian rights have been 
 allowed to get beyond state control, and the total known sources of water 
 supply are in the hands of individuals." The Australian Economist, vol. 
 I, May, 1888, p. 53. "New Zealand had seen the spectacle, extraordinary 
 for so young a country, of thousands of its most vigorous people going 
 abroad in search of work and land." Lloyd, Newest England, p. 107. 
 This was said also of the other colonies. Cf. The Australasian, August 9, 
 1890, p. 261. 
 
 * Reeves, op. cit., vol. i, pp. 204 ff. 
 
 * Australian Economist, vol. ii, June, 1890, p. 38. It is interesting to 
 note that of this vast area only 8385 acres (not counting artificial grasses) 
 were under cultivation. 
 
 * Reeves, op. cit., p. 243. Cf. also Papers bearing on Land Taxes, etc. 
 (Cd. 4750), 1909, p. 72. In 1891, 7,000,000 acres of freehold and 3,500,000 
 of leasehold, including much of the best land in New Zealand, according 
 to Mr. Reeves, were held by only 584 owners. Op. cit., vol. i, p. 216. 
 
 * The Australian Worker, March 4, 1915. That the sentiment with 
 regard to the "wasted heritage" is shared generally is evident from the 
 following passage in The Australasian, a conservative weekly published 
 in Melbourne, Victoria, and opposed to the land taxes: "Within thirty 
 years a population of about three quarters of a million will have mopped
 
 22 
 
 THE TAXATION OF LAND VALUE 
 
 The conditions of land tenure in relation to total area, 
 to population, and to area under cultivation in Australia 
 and New Zealand become further apparent from the sub- 
 joined table. 
 
 TABLE SHOWING THE PUBLIC ESTATE, AREA UNDER 
 CROP, AND POPULATION PER SQUARE MILE IN 
 AUSTRALASIA IN 1905* 
 
 aiau 
 
 Total area 
 in acret 
 
 Area alien- 
 ated or in 
 procets of 
 alienation 
 
 Area leased 
 
 Area un- 
 der cuUi- 
 tation 
 
 Popu- 
 lation 
 
 per 
 square 
 
 mile 
 
 New South Wales 
 
 198,634,880 
 66,245,760 
 427,838,080 
 243,244,800 
 624,588,800 
 16.778,000 
 835,116,800 
 
 49.970,335 
 26,346,802 
 17,659,874 
 13,467,924 
 12,380,035 
 6,388,953 
 475,366 
 
 123,015,992 
 17,994,233 
 
 240,152,615 
 89,249,487 
 
 145,769,592 
 1,303,383 
 
 103,278.250 
 
 2,840,235 
 
 3,219,962 
 
 622,748 
 
 2,255,669 
 
 364,704 
 
 230,237 
 
 4.38 
 13.67 
 
 Queensland 
 
 0.76 
 
 South Australia 
 
 Western Australia 
 
 0.40 
 0.19 
 6.67 
 
 Northern Territory .... 
 
 
 Commonwealth 
 
 1.902,447,120 
 
 125,639,289 
 
 720,763,561 
 
 9.433,455 
 
 1.27 
 
 
 66,861,440 
 
 26,030,264 
 
 17.340.790 
 
 1,723.837 
 
 7 39 
 
 
 
 
 
 * Compiled from data in Anderson, Six States oj Australia and New Zealand, 1861 to 
 1906 (Official Statistics), pp. 1, 23, 27. 
 
 It is to be gathered from the above-mentioned facts that 
 the land problem in Australasia is acute not because of a 
 scarcity of land, but because of a scarcity of free, unalien- 
 ated, arable land. The population of all the colonies is 
 somewhat over five millions. Of these about one and one- 
 half millions live in cities. The area, on the other hand, 
 exceeds 3,000,000 square miles, of which at least one-third 
 is good agricultural and mineral land. In 1909, the acreage 
 of occupied land in New Zealand was over 38 millions, 
 while in the Commonwealth of Australia more than 930 
 million acres were held by individuals and companies.^ 
 
 up S3i millions of acres in one of the finest countries of the world." 
 Vol. XX, April 15, 1876, p. 497. 
 
 ^ Computed from data in the Official Year Books quoted above. Under 
 alienated land was included land held under lease or license as well as that 
 alienated and under process of alienation.
 
 LAND TAXES IN AUSTRALASIA 23 
 
 This makes a total of over 968 million acres or approxi- 
 mately one and one-half million square miles in private 
 possession. It is noteworthy, however, that of this vast 
 territory under private tenure only about 26.5 million 
 acres, less than three per cent, were, in 1909, under culti- 
 vation. Of the two Commonwealths New Zealand shows 
 the denser settlement, for about forty per cent of its occu- 
 pied land was under cultivation as compared with one per 
 cent in Australia. When we add that each of the seven 
 states has had to pass laws providing for the public re- 
 purchase of land in the interest of denser settlement, the 
 monopolization of land in Australasia is seen to be no mere 
 bugbear. For more than half a century now, the govern- 
 ment has been attempting to undo the evil perpetrated by 
 its own legislation ^ and to bring about closer settlement, a 
 policy which has now become a means of attracting immi- 
 grants. 
 
 3. Added to the land legislation, the taxation of the 
 large estates, as a means of overcoming the evils of land 
 tenure, became in the seventies a popular cry. The fact 
 that many of the large landed proprietors were absentees 
 only aggravated the concerted agitation of the colonies.' 
 The progressive land tax to "burst up the large estates" 
 was the liberal nostrum of that time.^ The National Re- 
 
 * A report on the working of the land system in New South Wales calls 
 it a " huge failure, which fosters the formation of large freehold estates in 
 the best parts of the grazing country." The Australasian, May 12, 1883, 
 p. 593. " The 'law had made settlement hard for the bona fide selector . . . 
 has built up large estates." Ibid., April 15, 1876. The editor would have 
 done with the "liberal land policy." 
 
 ' ' The following quotation was uttered by one who regarded the tax 
 as a confiscatory, penal tax: "Many of the latter worthies (absentees) 
 left the coimtry for the more promising sphere of operations that New 
 South Wales affords, and we have not even the benefit of their ill-gotten 
 gains being expended in the country." The Australasian, September SO, 
 1876, pp. 432-33. 
 
 * "The proposed tax upon absentees ... is merely a concession like 
 the little bit of progressive land tax to a mere popular cry." Ibid., vol. 
 XIX, July 24, 1875, p. 113. "A progressive land tax is popular with a
 
 U THE TAXATION OF LAND VALUE 
 
 form League, to which the university professors of eco- 
 nomics belonged, was active in the movement of checking 
 landed monopoly and absenteeism. Under this influence 
 Mr. Berry ^ in Victoria and Sir George Grey ^ in New Zea- 
 land came into office. Already, in 1875, a progressive land 
 tax ' was proposed in Victoria, but was withdrawn. In 
 1877, however, the will of the people was carried out and 
 a land tax (not on the unimproved value, however) * was 
 passed by both houses of Parliament. The first tax on 
 unimproved value was enacted the following year in New 
 Zealand through the efforts of John Ballance, Treasurer, 
 and Sir George Grey, Premier. 
 
 The purpose of the tax is revealed somewhat in the fol- 
 lowing citation from a speech of Mr. Ballance: ^ "And here 
 I may take the opportunity of disclaiming and repudiating 
 the charge which is sometimes made, that the government 
 have in contemplation a class tax. The very contrary is 
 the fact. We hold that the system which we propose to 
 correct has worked unfairly in the past; that it has fav- 
 ored the escape of taxation of the greater portion of the 
 wealth of the colony, and has implanted a strong sense of 
 injustice in the minds of the wage class. The readjustment 
 
 certain class party of anarchy and confusion simply because it 
 aims at the gradual confiscation of landed estates." Ibid., September 
 SO, 1876, pp. 432-33. Cf. also ibid., February 17, 1877, p. 209. 
 
 ^ "Mr. Berry declares that he would be delighted if within twelve 
 months every large estate was divided so that the tax did not bring in a 
 shilling into the revenue." Ibid., April 2, 1881, p. 432. 
 
 * Grey said, "Those who acquire land by unlawful means and so pre- 
 vent its cultivation are enemies of the human race." Ibid., December 
 23, 1876, p. 819. 
 
 * The proposed bill was "The Land, Property and Income Tax." The 
 land tax was to be charged on lands, exclusive of buildings, at the rate of 
 Is, in the pound between 80 and 200 annual value, and at Is. 6d. in 
 cases above 200. The annual value was assumed to be five per cent on 
 the capital value of the fee. Ibid., vol. xx, March 25, 1876, pp. 400-01. 
 
 * The tax fell only on the large estates, and the principle of the tax 
 on land value was violated by the provisions of valuation. See infra, 
 10. 
 
 ' Quoted in The Australasian, September 17, 1878, p. 305.
 
 LAND TAXES IN AUSTRALASIA 96 
 
 we hope to effect will tend to efface the inequalities I have 
 referred to; and instead of promoting hostilities between 
 classes will remove the causes which have been gradually 
 estranging them. . . . We believe that no form of wealth 
 is more legitimately called upon to contribute a portion of 
 the public revenue of the colony than the value of land 
 minus improvements, which for brevity, I shall call the 
 unimproved value, as no other commodity increases so 
 rapidly in value from the increase of population and the 
 natural progress of a country. By exempting improve- 
 ments, we award a premium to industry and discourage a 
 system of speculation which thrives only upon the labor of 
 others." The life of this measure, however, was short. 
 With the overthrow of the liberal ministry in the following 
 year the tax was repealed.^ 
 
 If each law relative to the taxation of unimproved 
 value for state purposes were reviewed, the charge of class 
 legislation repudiated by Mr. Ballance would be found to 
 be substantiated. Not one would be found which was not 
 actuated by the same motive, the disintegration of the 
 large estates and of absentee holdings.* It was also the 
 avowed purpose of the "Labor Parliament" in enacting 
 the Commonwealth tax in 1910.' Indeed, the provisions 
 of the acts themselves, such as the graduated scale, the 
 exemption of estates of less than 5000, the absentee 
 
 * "The great landowners trembled. They believed it was putting in 
 the thin edge of the wedge. They rallied all their forces and in one year 
 the tax was repealed and Sir George Grey was punished by expulsion." 
 Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, p. 69, 
 
 * Cf. New Zealand, Pari. Debates (1878, 1891, 1893, 1896, 1907). The 
 Australasian, vols. LVi, Lix, Lxxxrv, lxxxvi. "With such figures as 
 these, evidencing an earth hunger of an unhealthy character, the sooner 
 a land tax is imposed the better will it be for the development of the col- 
 onies' resources." Australian Economist, vol. n, Jime, 1890, p. 38. 
 
 ' Commonwealth of Australia, Pari. Debates (1910), vols, lv, lvi, 
 LVii. A candidate in the election of 1910 is reported to have said: "The 
 Labor Party's chief plank at this election is to penalize the owners of the 
 big estates, so that it will be unprofitable to hold them." Quoted by 
 Turner, iThe First Decade of the Australian Commonwealth (1911), p. 286.
 
 26 THE TAXATION OF LAND VALUE 
 
 rates, give evidence that the enactment of the tax on the 
 unimproved value of land was directed against the holders 
 of large estates. 
 
 4. Was the land tax, then, discriminatory class legis- 
 lation pure and simple? Was it mere pretense on the part 
 of the Minister of State that the exigency of the treasury 
 required new sources of revenue? An understanding of the 
 fiscal policy of the colonies throws Hght on this question. 
 For purposes of analysis, the fiscal problems of the federal 
 and state governments must be kept distinct from the 
 problem of local revenue. 
 
 The weakness of the state finances during the seventies 
 and eighties is attributable to several causes. First, the 
 indebtedness of the colonies and the over-expenditure for 
 purposes of public improvements of all kinds produced 
 an ever- increasing drain on the treasury.^ Secondly, the 
 remission of the tariff duties in some of the states caused a 
 deficit. 2 Thirdly, the loss of the land fund ^ further in- 
 creased this deficit in the colonies. Under these circum- 
 stances direct taxation had to be resorted to. It is signifi- 
 cant, therefore, that synchronously with the movement 
 to reduce the tariff duties which had obviated for a long 
 time the necessity of direct taxation, the land taxes were 
 either proposed or enacted. 
 
 Now, it might be argued that the fiscal needs of the 
 state government directly brought the land taxes into 
 
 * About 1880 there was a deficit in the treasuries of all the colonies 
 due to over-expenditure. The Australasian, August 14, 1880, pp. 208- 
 09. Again in 1887. Cf. ibid., August 20, 1887, p. 360. 
 
 ' The land tax was proposed as a substitute for the remitted tariff in 
 Victoria in 1875, and again in 1877, when the free traders succeeded in 
 reducing the tariff, and when the tax was passed. Cf. The Australasian, 
 August 21, 1875; January 20, 1877, p. 80; July 21, 1877, p. 80; Septem- 
 ber 7, 1878, p. 305. In New South Wales, the land tax became a law at 
 the same time that the reduction in customs took place, in 1895. Ibid., 
 May 25, 1895, p. 989. 
 
 * As the land became appropriated the revenue from its sale fell off. 
 Cf. ibid., August 14, 1880, p. 208. Coghlan, A Statistical Account of the 
 Seven Colonies of Australasia (1892), p. 274.
 
 LAND TAXES IN AUSTRALASIA 27 
 
 existence. This, indeed, seems plausible when the unpop- 
 ularity of the income and general property taxes in Aus- 
 tralasia is considered, for the latter usually constitute the 
 most practical successors of the protective tariff.^ That 
 the land taxes, however, were not intended as substitutes 
 for the income and general property taxes is clear from the 
 fact that in almost all cases they are incorporated with 
 the income tax provisions, and from the fact that the land 
 taxes constitute but a small percentage of the total tax 
 revenue,'^ It is difficult, therefore, to believe that the fis- 
 cal exigencies did more than offer the occasion, the oppor- 
 tune moment, for the enactment of a popular reform. 
 This explains, moreover, why the land-tax propaganda was 
 ineffective during the years of plenty and why the land- 
 tax bill failed of passage in South Australia in 1890.' It 
 also explains why it took the Labor Party a decade to en- 
 act the land-tax bill, although from the first they practi- 
 cally controlled the Federal Parliament.* So long as the 
 treasury was filled, the propaganda was carried on in vain. 
 For federal and state purposes, therefore, the fiscal needs 
 
 " * So unpopular was the income tax in Tasmania that a ministry actu- 
 ally refused to collect it. The Australasian, April 27, 1907, p. 989. Cf. 
 also ibid., March 4, 1876; July 23, 1881, p. 113. "For bringing in revenue 
 the property tax was an efficient instrument. It soon became, however, 
 exceedingly unpopular, not only among Radical theorists, but among 
 commercial men, shopkeepers and manufacturers. . . . They [the farmers] 
 contrasted their lot with that of comfortable town-dwelling profes- 
 sional men whose substantial incomes went wholly untaxed, and who 
 paid merely on savings and investments. It is necessary to draw atten- 
 tion to the severity and unpopularity of the property tax, for it was these 
 which enabled the land-taxers to win the day in 1891." Papers Bearing 
 on Land Taxes, etc. (Cd. 4750), 1909, p. 69. Cf. also New Zealand, Pari. 
 Debates (1891), vol. Lxxrv, p. 24. 
 ' See infra, chapter iii, 7. 
 
 There was no need of revenue. The Australasian, August 9, 1890, 
 p. 261. "The revenue aspect was a purely secondary consideration." 
 Ibid., February 24, 1906, p. 455. As to the proposed federal land tax, to 
 create a fimd to carry out the pension scheme was said not to be the gen- 
 uine reason. Ibid., April 3, 1909, p. 849. 
 
 * Ibid., 1904-09, vols, lxxvi-lxxxvu.
 
 98 THE TAXATION OF LAND VALUE 
 
 aided, but were not the cause of the enactment of the land- 
 tax laws. 
 
 5. Turning from the consideration of the land taxes for 
 state and federal purposes to that of the local rates on 
 unimproved value, we see that the situation is very differ- 
 ent. Conceding that large holdings and absenteeism were 
 thorns in the side of the general public and exerted an 
 inJBluence in the adoption of rating on the unimproved 
 value of the land, we find that other more fundamental 
 causes, chiefly fiscal, were responsible for the tax agitation 
 in the local bodies. It is noteworthy that the local taxes 
 on unimproved value antedated the state taxes. Already, 
 in 1878, this system of rating was in vogue in the colonies.^ 
 In tracing the causes that led to the ready adoption of the 
 tax for local purposes, it is first necessary to point out that 
 until the nineties the local revenue in the Australasian 
 colonies consisted chiefly of the "endowments," ^ or grants 
 apportioned among the local divisions by the state govern- 
 ment. Hence there was little need of levying rates, es- 
 pecially as education and local improvements were mainly 
 under state jurisdiction.^ In the eighties, however, as the 
 expenditures of the states increased without a correspond- 
 
 * "It is reassuring to notice a growing feeling among municipalities 
 in favor of rating on land, irrespective of improvements." Mr. Foxall, 
 "The Principles of Taxation," in The Australian Economist, vol. i. May 
 12, 1888, p. 45. "It will be recollected that at the late municipal confer- 
 ence a resolution was carried in favor of placing municipal taxation on the 
 unimproved value of land and in the proposed new 'Local Government 
 Bill * municipalities are empowered on certain conditions to carry this 
 into effect, and it is more than probable that the Legislature will en- 
 dorse this power." Ibid., vol. ii, March 20, 1890, p. 1. See also New 
 Zealand, Pari. Debates (1878), vol. xxrx, p. 17. 
 
 * The "endowment" is an annual subvention voted by the state gov- 
 ernment at fixed intervals to the municipality or other local body and is 
 generally a sum proportioned to the revenue raised by the community 
 through local rates. In other words the "endowment" is proportioned 
 according to the fiscal needs of the local authority. 
 
 * Until the "Local Government Bill" was passed in New South Wales, 
 all local improvements also were imdertaken by the state government. 
 Cf. The Australasian, August 5, 1905, p. 325.
 
 LAND TAXES IN AUSTRALASIA 99 
 
 ing increase in the revenue, attempts were made by some 
 of the states to reduce the municipal '* endowments." In 
 Victoria, for example, the exigencies of the treasury, in 
 1880, necessitated such a reduction.^ This policy in Vic- 
 toria, however, did not involve so important a change in 
 local government as occurred in Queensland in 1890. 
 
 The finances of Queensland were in that year in a pre- 
 carious condition, and the heavy tax levied on property 
 to pay the municipal "endowments," led to a change in 
 the ministry. Griffith's Coalition Government came into 
 power and succeeded in putting through the legislature the 
 "Valuation and Rating Bill of 1890," by which the powers 
 of the local authorities were extended to raise revenue 
 by rating on the unimproved value of land. In this way 
 the central government relieved itself of subsidizing the 
 local bodies and incidentally introduced the taxation of 
 unimproved value. ^ As to New South Wales, the motive 
 which in 1905 actuated the central government to relin- 
 quish the state land tax in favor of the shires, and then of 
 the municipalities, was not the fiscal need, although a fis- 
 cal problem was involved. It was the desire to shift to the 
 local bodies some of the functions of government, e.g., the 
 administration of local works.^ The legislation, by which 
 the state land tax was relinquished to the local bodies was 
 therefore in the interest of local autonomy. 
 
 But to say that the extension of local government was 
 the outcome of fiscal conditions explains nothing as to the 
 cause of adopting the new system of levying rates. The 
 reasons for choosing this tax will be found in certain ad- 
 vantages claimed for it in the cases where it was in use. 
 
 1 The Australasian, October 30, 1880, p. 560. 
 
 * The deficit in Queensland amounted to 1,300,000. The Morehead 
 Ministry had proposed an excise tax for state purposes. This proved 
 unpopular. His successor, Mr. Griffith, had always favored the tax on 
 unimproved value and urged it with success. The Australasian, August 
 8, 1891, p. 265. Cf. also Papers Bearing on Land Taxes, etc. (Cd. 4750), 
 1909, pp. 199-200; and (Cd. 3890), 1908, pp. 6/. 
 
 * The Australasian, August 5, 1905, p. 325.
 
 80 THE TAXATION OF LAND VALUE 
 
 These reasons are concisely summarized in the following 
 preamble of a proposed bill of 1891: ^ "Whereas the value 
 of land within a municipality is increased by the expen- 
 diture of rates; and whereas the benefit of all expenditure 
 of public moneys ought to accrue to the public and not to 
 private owners; and whereas the present assessment of 
 rates throws the burden of municipal taxation upon in- 
 dustry and enriches the owners of land at the expense of 
 the rate payers; and whereas such a method of raising rates 
 discourages industry, prevents settlement, and is other- 
 wise inequitable, and unsocial. . . ." 
 
 In other words, it is here argued that: (1) local taxes 
 should be levied according to the principle of benefit; that 
 (2) the value increment accruing from the appreciation in 
 the value of the land is socially created and belongs to the 
 community; that (3) industry is hampered by the taxa- 
 tion of improvements; that (4) under the system of annual 
 value rating, land is withheld from utilization; and that 
 (5) an unequal distribution of wealth is fostered and immi- 
 gration prevented through the creation of large landed es- 
 tates and absenteeism. In new democratic communities, 
 benefit, i.e., the service which the taxpayer receives in 
 return for his contribution, rather than ability to contrib- 
 ute, is regarded as the fair basis of taxation. In fact, 
 where land is the principal source of wealth and income, 
 and the ratepayers are the owners of land, the value of 
 the land is not alone the measure of the benefit, but also 
 of the ability to contribute. And the theory of "socially 
 created land value" is but an application of the benefit 
 theory which rests on the assumption that the expendi- 
 ture and increase of population influence the value of the 
 land. Again, in such communities it is very obvious that 
 the taxation of improvements tends to discourage the 
 employment of capital and to put a premium on the with- 
 
 * The Australian Economist, vol. ii, September, 1891, p. 152, Mr. B. R. 
 Wise's bill to amend the Municipalities Act of New South Wales.
 
 LAND TAXES IN AUSTRALASIA 81 
 
 holding of unused land.^ In fact, in a new country where 
 capital is scarce, the rate of interest high, and land the 
 chief source of wealth, the proposal to exempt improve- 
 ments and to tax the capital value of the land will meet the 
 approval not alone of the landless urban dweller but of 
 the enterprising farmers as well.'' And lastly, the resent- 
 ment of the ratepayers toward the absentee owner of un- 
 improved land ^ who escapes taxation and yet reaps the 
 benefit of the appreciation in the value of the land, is 
 readily comprehensible. 
 
 6. But it may be asked, was not, then, the propaganda 
 of the Single Taxers instrumental in bringing the land 
 taxes into operation. The query is, indeed, both plausible 
 and justified in view of the situation. First, the writings 
 of Henry George and Alfred Wallace * were frequently 
 C^^uoteA and discussed.^ Secondly, the activity of the Single 
 Taxers, especially after George's visit to Australasia in 
 1890, was unremittent. Thirdly, George's presence and 
 his popularity strengthened the cause, "his intellectual 
 charm" and "fine speaking powers" winning many con- 
 verts.^ Unquestionably in a country where land specula- 
 tion and land monopoly were rife, and the land policy of 
 the government was a recognized failure, the Single Taxers 
 discovered a fertile field for their work. ^ 
 
 ^ The Australian Economist, vol. i, May, 1888, p. 45. Also New Zea- 
 land, Pari. Debates (1878), vol. xxix, p. 58. 
 
 ' Papers Relative to the Working of Taxation on the Unimproved Value 
 in Queensland (Cd. 3890), 1908, pp. 6/. 
 
 New Zealand, Pari. Debates (1896), vol. xcii, p. 632. 
 
 * Land Nationalization (1882). 
 
 * Cf. The Australian Economist, vol. i, April 14, 1888. The taxation of 
 land and its nationalization were frequently discussed at the meetings 
 of the Australian Economic Association, and also in Parliament. 
 
 8 "Mr. George's visit is bearing fruit in the shape of a very general 
 interest being everywhere manifested in the economic problems he has 
 so eloquently proposed and so earnestly desires to see solved." The 
 Australian Economist, vol. ii, March, 1890, p. 19. Cf. also ibid., vol. i. 
 May 26, 1888, p. 49. The Australasian, April 6, 1890, p. 672; March 29, 
 1890, p. 628. 
 
 ^ "It is a fact well worthy of the attention of the advocates of high
 
 /: 
 
 y 
 
 82 THE TAXATION OF LAND VALUE 
 
 Nevertheless, admitting the influence that the Single 
 Tax leagues exerted in the movement, there is conclusive 
 evidence that the conception of taxing on unimproved 
 value has had a spontaneous growth in Australasia ^ and 
 that the Utopian philosophy of the Single Tax is accepted 
 by but a small group of devotees.'^ First, the system was 
 in vogue before the eighties and before even the publica- 
 tion of "Progress and Poverty" in 1879. Second, the Vic- 
 torian Land Tenure Reform League had already in 1872 
 embodied the Single Tax doctrine in its platform.^ Third, 
 
 tariF that the single-taxers have made converts among the land owners 
 themselves." Ibid., November 3, ISQ*, p. 793. 
 
 * It might be argued with reason that neither George nor the Austral- 
 asians were the original founders of the Single Tax doctrine, which can 
 be traced back to Spence {Rights of Man, 1775), Ogilvie {Essay on the 
 Right to Property in Land, 1782), Gossen {Die Entwicklung der Gesetze 
 des menschlichen Verkehrs, 1854>), Walras {Th6orie Critique de Vim-pot, 
 1861) and others. 
 
 2 That the Single Tax organizations are no larger than those in this 
 country may be gathered from the following facts: (1) the guaranteed 
 circulation of the Liberator, the organ of the New Zealand Land Values 
 League, is 5000 copies per month and there are two copies monthly; (2) 
 the total receipts for the Joseph Pels Pund of New Zealand from March 
 30 to October 15, 1913 (including all subscriptions to the Liberator) were 
 only about 219. This sum is small considering Mr. Fels's offer to dupli- 
 cate the amount contributed. 
 
 ' The following quotations are from a circular of the League which 
 appeared in 1872: 
 
 "The land is the inalienable property of the inhabitants of every coun- 
 try throughout all generations." 
 
 " 'No consideration ought to be paramoimt to that of making the land 
 available in the highest degree for the production of food and the em- 
 ployment of industry.' " 
 
 "Selling the fee-simple of the land is a political misdemeanoiu*, as 
 opposed to justice and reason, as it has proven injurious to the material 
 and moral interests of society." 
 
 "The alienation of the State lands gives to the landowner the 
 whole improvement in value from the increase of population and national 
 works. The State Landlord preserves all for the benefit of the 
 people." 
 
 " Land is the State capital, the primal source of food and wealth, and 
 in parting with it our legislators have not only most iniquitously limited 
 the field of profitable employment, but have biu"dened the people need- 
 lessly with double taxation the one a highly unjust system to provide
 
 LAND TAXES IN AUSTRALASIA 33 
 
 t]^ study of the taxes as enacted makes it apparent that 
 no close analogy exists between the two systems. The 
 numerous exemptions, low rates, progressive scales surely 
 do not reflect the striving of the Single Taxers to make the 
 land tax the sole tax.^ In fact, since the enactment of the 
 taxes, no attempts have been made as was predicted, to 
 tighten the screw or to approach anything like the con- 
 fiscation or the nationalization of the land. In those cases, 
 where, as in New Zealand, the graduated scale of rates has 
 been increased, the purpose has clearly been the disin- 
 tegration of the large estates, nothing more. The land 
 taxes, as well as other social legislation, are accepted by a 
 
 a general revenue; the other a direct tax on food and the necessaries of 
 life, to enable landlords to live in idleness by the labor of others." 
 
 "A rent on State lands being light, and for a manifest benefit, would 
 meet all the requirements of a just and desirable means of raising revenue. 
 It would be easily and cheaply collected, and would greatly reduce the 
 expenses of government by rendering unnecessary some of the present 
 costly and otherwise hurtful departments." 
 
 "While strictly preserving the right of ownership in land for future 
 generations, the greatest possible facilities for actual and productive settle- 
 ment may be afforded." 
 
 "The advantages of ahnost free land, and the total absence of taxation, 
 would ensure an unexampled condition of steady progress and general 
 prosperity." 
 
 " With an absolute freedom from taxation, and fvU and unfettered scope 
 for industry, every inhabitant of the country would enjoy a beneficial in- 
 terest from his share in the state lands, whether occupying a portion of these 
 or not." 
 
 " 'The best political economy is the care and culture of men.' And 
 such a use of the common patrimony, the gift of God to all, would not 
 only promote to the utmost the material welfare of society, but would 
 raise us mentally in the scale of nations, by affording the most liberal 
 culture of which each is capable; special privileges, which should be 
 deemed the inherent right of every member of the community." 
 
 (Italics by the present writer.) Quoted in Laveleye's De la PropriH& 
 et ses Formes Primitives, pp. S46 jf. 
 
 ^ The local rates on unimproved value even in Queensland, where they 
 constitute practically the sole source of revenue, are 'low. In fact, the 
 secret of the successful working of the tax there has been claimed to be 
 the low rate of tax, kept so because of the constant great appreciation 
 in land value. Cf. Papers Relative to the Working of Taxation, etc. (Cd. 
 8890), 1908, pp. 9, 20.
 
 (y 
 
 84 THE TAXATION OF LAND VALUE 
 
 large number of the Australasian population, "whose 
 tendencies are very individualistic and who contest with 
 energy the influence of the Labor Party." ^ 
 
 Summarizing the causes which called the taxes on un- 
 improved value into being, we may say that the land taxes 
 for federal and state purposes owe their origin chiefly to 
 the conditions of land tenure in the colonies, and that the 
 local rates were adopted because of the fiscal expediency 
 of the system. Furthermore, the fiscal exigencies merely 
 furnished the occasion or opportunity, and the activity of 
 the Single Taxers the necessary propaganda for the enact- 
 ment of the laws. 
 
 7. From the above analysis of the causes of enact- 
 ment, we turn to the study of the taxes themselves. The 
 following is a summary of the important considerations 
 with regard to the legislation, administration and working 
 of the land taxes in Australasia; 
 
 (1) Rates of tax and modes of assessment. 
 
 (2) Methods of valuation and administration. 
 
 ; (3) Revenue yielded, and other fiscal considerations. 
 
 (4) Revisions in the laws to carry out their purpose. 
 
 (5) Social and economic effects of the taxes. 
 
 It is first necessary to point out the extent in the colonies 
 of the system of the taxation on the unimproved value. 
 The tax for state purposes is now levied by New Zealand 
 and five of the six Australian states, Queensland being the 
 only one that has never levied a state land tax. Since 
 1905-06 New South Wales has received only a slight reve- 
 nue from the land tax, the state having relinquished the 
 tax in favor of the shires and municipalities which have 
 adopted rating on the unimproved value. It is important 
 to note in regard to the state land tax that in each case it 
 is only one out of a number of sources of public revenue. 
 Thus customs duties, excise duties, income taxes, death 
 duties, licenses, etc., form part of the fiscal system of each 
 * Vigouroux, L'Evolution Sociale en Australasie, p. 222.
 
 LAND TAXES IS AUSTRALASIA 35 
 
 of the colonies. Furthermore, the land tax is in almost all 
 cases levied in conjunction with the income tax, i.e., under 
 the same administrative machinery and incorporated in 
 the same laws. Again, it is noteworthy, that, before 1910, 
 the land taxes in both Victoria and Tasmania were levied 
 on the capital value of the land plus the improvements.* 
 
 At present the local authorities empowered to levy rates 
 on the unimproved value of the land are those in New 
 Zealand, New South Wales, Queensland, South Australia, 
 and Victoria. Accordingly, all the local bodies in Queens- 
 land, practically all in New South Wales, and numerous 
 communities in New Zealand, levy taxes, called rates, 
 according to this system. In South Australia, however, 
 no municipality had until 1906 taken advantage of the 
 privilege extended to it in 1893. ^ In Queensland the tax 
 on unimproved value for local purposes is practically the 
 single tax. So is it in those bodies in New Zealand which 
 have adopted the system. In New South Wales all general 
 rates in both the shires and municipalities must be levied 
 on the unimproved value; while the levy of additional 
 general rates in the municipalities, and of all special rates 
 on the unimproved value is optional with the local author- 
 ity. In 1914 rating on unimproved value was made op- 
 tional with the local authorities in Victoria.' 
 
 It is difficult to measure the extent of the prevalence of 
 the system of rating on unimproved value, for in many 
 communities rating on this basis prevails even where the 
 State Act has not authorized its practice. Certain it is, 
 however, that the adoption of the system is proceeding 
 rapidly. If, as is so generally feared, a land valuation bill 
 
 * In Victoria it was not the intention of the legislators to enact a realty 
 tax, as it was in Tasmania; nevertheless, because of the peculiar method 
 of valuation the purpose of the tax was frustrated, the tax burdening the 
 grazing industry. See infra, 10. 
 
 ' Papers Bearing on the Land Taxes, etc. (Cd. 4750), 1909, p. 114. 
 
 ' By the enactment of the "Rating on Unimproved Values Act, 
 1914." Victoria, 4 Geo. V, No. 58478. 
 
 ^'
 
 86 THE TAXATION OF LAND VALUE 
 
 is the harbinger of local rating on land value, ^ then the 
 adoption of the system in Tasmania, with its Land Valua- 
 tion Act of 1909,^^ may be predicted. In Western Australia 
 many local bodies rate on this basis even though no State 
 Act to the effect exists.^ In this state, indeed, the "Roads 
 Act, 1902" gave Road Boards the option of rating on the 
 basis of the unimproved annual (i.e., rental), or capital, 
 value, except in case of mining and pastoral leases to be 
 rated on annual value exclusively. In accordance with this 
 privilege, out of 105 Boards, 57 now rate on unimproved 
 value, two rate partly on annual and partly on unimproved 
 value, while the rest rate on annual value.* 
 
 In 1910, the land tax was made a source of federal reve- 
 nue in the Commonwealth of Australia. Like the state 
 land taxes this one constitutes a small percentage of the 
 total tax revenue of the Commonwealth. However, taking 
 all the systems together, federal, state, and local, the bur- 
 den on land in Australasia is considerable. An analysis of 
 the state, local, and federal systems follows. 
 
 8. We may first consider the tax for state purposes in 
 New Zealand, where it has been in operation for about a 
 quarter of a century.^ The changes that the provisions of 
 the land-tax law have undergone in this colony since 1891 
 are noteworthy. These will be treated in the following 
 analysis of the important provisions relating to rates and 
 
 1 Cj. The Australasian, July 25, 1908, p. 229; also September 25, 1909, 
 p. 823. 
 
 Tasmania, 9 Edw. VII, No. 7. 
 
 The First Annual Report of the Commissioner of the Land Tax of the 
 Commonwealth of Australia (1912), p. 6. 
 
 * Ibid. 
 
 5 The Land Tax Act of 1878, repealed the following year, was a charge 
 of ^d. in the pound of the capital value of the land, deducting the value 
 of all improvements. An exemption of 500 was allowed. Cf. New 
 Zealand, Pari. Debates (1878), vol. xxix, pp. 414-15. The Acts that gov- 
 ern the tax on umimproved value in this colony are The Land and Income 
 Assessment Act, 1891, amended in 1893, 1900, 1903. 1907, and 1912. Cf. 
 also The Valuation of Land Amendment Act, 1908, amended in 1912. For 
 the rate of tax cf. the annual Land-tax and Income-tax Acts.
 
 LAND TAXES IN AUSTRALASIA 87 
 
 assessment, under (a) the ordinary rate, (b) the graduated 
 scale, (c) the absentee charge, (d) the tax on mortgages, 
 (e) the exemption of improvements. 
 
 (a) The ordinary rate which has remained unchanged 
 is Id. in the pound of the actual value of the land minus 
 the value of the improvements and minus the value of any 
 mortgages owing on the land. Land whose assessed value 
 does not exceed 1500 is allowed an exemption of 500; if 
 its value exceeds 1500 but is less than 2500, the exemp- 
 tion diminishes by l for every 2 of the surplus value 
 over 1500, so that when the assessed value reaches 2500 
 or more no exemption is allowed.^ In computing the 
 amount of exemption the value of the mortgage or mort- 
 gages is not subtracted from the value of the land.^ Thus, 
 should the value of the land when the mortgage is included 
 be 2500 no exemption is allowed. The only other exemp- 
 tion ' from the ordinary tax provided for is that in case of 
 an owner incapacitated by age or ill health from earning 
 an income (except from the land) exceeding 200 per an- 
 num. In such a case the exemption may be any sum not 
 exceeding 2000,^ or where the taxpayer is a widow 
 with dependent children, not exceeding 3500,^ at the 
 discretion of the Commissioner of Taxes when he is satis- 
 fied that the payment of the tax in full would entail hard- 
 ship on such owner. 
 
 (b) In addition to the ordinary tax, a graduated tax 
 is charged on all land whose value is 5000 or above. 
 The graduated scale has undergone many revisions for the 
 purpose of raising the rate on the larger estates. The 
 scale began with a rate of ^d. in the pound on land valued 
 
 1 New Zealand, 56 Vic, No. 18, Schedule A, Arts. 1, 2, 
 
 2 Ibid., Art. 2. 
 
 * Barring the usual exemptions of land owned by the government and 
 used for special purposes, e.g., educational, charitable, etc. 
 
 * New Zealand, 55 Vic, No. 18. 2. 
 
 ' Amended provision in Land and Income Assessment Amendment Ad, 
 1912 (New Zealand, 3 Geo. V, No. 10), 86. 
 
 857S2
 
 88 
 
 THE TAXATION OF LAND VALUE 
 
 at 5000, rising to l^d. on a value of 210,000, or above, 
 the increment being ^d. for every 10,000.^ Already, 
 in 1893,2 ij^Q scale was slightly modified so that on land of 
 210,000, or above, the rate was increased from l%d. to 
 2d. A more drastic amendment was passed in 1903,^ when 
 the rate on all land of more than 7000 unimproved value 
 was raised, and the scale graded to yield 3d. instead of 2d. 
 on the largest estates. In 1907,* the year when the screw 
 was put on with vigor, the progressive tax took the follow- 
 ing form: 
 
 RATE OF GRADUATED TAX ON THE UNIMPROVED 
 VALUE OF LAND, 50000 TO 40,000 
 
 Where the value is 5,000 and less than 7,000, yVd. in the pound 
 
 
 7,000 
 
 
 
 " 
 
 9,000, j\d. 
 
 
 
 ' 9,000 
 
 
 
 <t 
 
 11,000, ^^d. 
 
 
 
 11,000 
 
 
 
 
 
 13,000, j\d. 
 
 
 
 13,000 
 
 
 
 <i 
 
 15,000, j%d. 
 
 
 
 15,000 
 
 
 
 
 
 17,500, ^^. 
 
 
 
 17,500 
 
 
 
 
 
 20,000, f^d. 
 
 
 
 20,000 
 
 
 
 
 
 22,500, j%d. 
 
 
 
 22,500 
 
 
 
 t 
 
 25,000, Ad. 
 
 
 
 25,000 
 
 
 
 
 
 27,000, Hd. 
 
 
 
 27,500 
 
 
 
 <i 
 
 30,000, \ld. 
 
 
 
 ' 80,000 
 
 
 
 It 
 
 35.000, \id. 
 
 
 
 35.000 
 
 
 
 < 
 
 40,000, xfd. 
 
 
 At the value of 40,000 the rate becomes two-fifths 
 of one per cent, and for every additional 1000 of value 
 the rate is increased by one-hundredth of one per cent. The 
 rate reaches its maximum at 200,000, when it becomes 
 two per cent for that and any higher value.^ Further- 
 more, this Act stipulated that after March, 1910, an addi- 
 tion of twenty-five per cent to the above rate would be 
 charged ' in case of all estates over 40,000. It is significant 
 
 * New Zealand, 55 Vic, No. 18, Schedule B. This is only approxi- 
 mately correct, the increment being |d. between 5000 and 10,000, 
 yi. between 90,000 and 110,000, etc. 
 
 * Papers Bearing on Land Taxes, etc, (Cd. 4750), 1909, p. 134. 
 ' Ibid. 
 
 * New Zealand, 7 Edw. VII, No. 18, Schedule. 
 
 * Ibid., 4. 5, 6. Ibid., 7.
 
 LAND TAXES IN AUSTRALASIA 89 
 
 that this additional charge was not to apply to "business 
 premises," which were defined as "any piece of land in- 
 cluded within the area of a building used for business pur- 
 poses, together with such additional land as immediately 
 adjoins the said building, and is used and occupied in con- 
 nection therewith, and does not exceed in extent the area 
 of the building itself." ^ 
 
 In the Act of 1912 the graduated rates are as follows: ' 
 
 (a) From 5000 to 15,000, ^d. in the pound, in- 
 creased by ^r,^j5nd. for each pound of the excess 
 value over 5000. 
 
 (6) From 15,000 to 30,000, W. increased by 
 ^cixsrsd. for every pound of excess value over 
 15,000. 
 
 (c) From 30,000 to 200,000, W. increased by 
 Tirshu-ud. for every pound of excess value over 
 30,000. 
 
 (d) Over 200,000, 5^d. for every pound of unim- 
 proved value. 
 
 The maximum rate, it will be noted, is now about two 
 and one-half per cent as compared with two per cent in 
 the Act of 1907. Another change is that the twenty-five 
 per cent additional charge on other than business premises 
 now falls on estates of 30,000 and above, instead of be- 
 ginning with 40,000.3 
 
 (c) The purpose of the land tax is further shown by the 
 special rate on absentee holdings and by the amendments 
 of that provision. According to the original Act three or 
 more years' absence from the colony constituted absen- 
 teeism. Now, an absentee is one who has been away from 
 
 * Where the person is owner of both business premises and other land, 
 he pays the graduated tax, without the twenty-five per cent increase, on 
 all the land. To that tax is then added the additional charge (twenty- 
 five per cent) " on the amount of graduated land tax that would be pay- 
 able if he were not the owner of the business premises." Ibid., 7, (5). 
 
 New Zealand, 3 Geo. V, No. 11, 2. Ibid., No. 10, 44.
 
 40 THE TAXATION OF LAND VALUE 
 
 the colony for at least two years. More specifically, to be 
 exempt from the absentee tax one must have resided in 
 New Zealand at least one-half of the period of four years 
 immediately preceding the assessment, or, if the land has 
 been acquired within this four years, at least one-half of 
 the period between his acquisition of the land and the time 
 of assessment. Listead of the original super-charge of 
 twenty per cent, the rate of the absentee tax is now fifty 
 per cent of the graduated scale; so that, for example, if the 
 graduated rate for a certain value be 4(i. in the pound, an 
 absentee owner of that value will be charged 6d. in the 
 pound.^ V .-. 
 
 (d) In computing the assessment for the ordinary tax 
 the value of any mortgage or mortgages is deducted from 
 the taxable value of the land, but the value of mortgages is 
 included in the assessment for purposes of the graduated 
 tax. That does not mean that mortgaged land escapes 
 taxation, for the mortgage is held liable for a separate 
 mortgage tax of id, in the pound of the value of such mort- 
 gage. Compared with the ordinary tax the mortgage has the 
 advantage of jd. in the pomid.^ For all other purposes the 
 value of the mortgage is not deducted in computing the tax. 
 
 (e) It is interesting to note that in the original Act, for 
 purposes of the ordinary tax, improvements were exempted 
 only to the amount of 3000.^ Since 1893, however, all 
 improvements go imtaxed. For purposes of the graduated 
 tax the unimproved value only was from the first taxable. 
 What is included under improvements will be more ex- 
 plicitly pointed out in the sections on valuation.* But it is 
 of interest to note here the attempt not to tax value accru- 
 
 1 New Zealand, 7 Edw. VII, No. 18, 8. If an absentee taxpayer be 
 liable for the graduated tax jointly with a non-absentee, the land is 
 assessed jointly as if the one were not an absentee, and then the absentee 
 tax is computed to apply to the absentee. Moreover, while a corporation 
 is not considered an absentee, the shareholder may be so considered. 
 
 New Zealand, 55 Vic, No. 18, Schedule B. 
 
 Ibid., Schedule A. * See infra, chapter in, 3, 4.
 
 LAND TAXES IN AUSTRALASIA' [41 
 
 ing from the employment of labor and capital, as shown in 
 the provision of 1907 ^ exempting minerals, timber, and 
 flax which are being worked or used in good faith. 
 
 9. The general character of the Australian land taxes 
 for state purposes ^ is both like and unlike the system in 
 New Zealand. While there is a general similarity in pur- 
 pose and in definition, we note in the Australian Acts no 
 such persistent efforts to penalize the large landowners 
 suflficiently to bring about disintegration. This is made 
 evident by the fact that the only Australian state which 
 has a graduated tax is Tasmania, where the progressive 
 scale begins with Id. in the pound for land under 2500, 
 rising to 2^d. on estates of 80,000 or above.' And yet, 
 compared to the New Zealand scale, and considering that 
 no ordinary or absentee tax is levied in Tasmania, the Tas- 
 manian land tax is considerably less burdensome than the 
 New Zealand tax. As for the taxes in the other states, the 
 rate of tax in South Australia is ^d. in the pound on land 
 valued at 5000 or less. Id. on land of a greater value than 
 5000;* in Victoria it is a flat rate of ^d. in the pound;* 
 and in Western Australia ^ it is ^d. and Id. in the pound, 
 respectively, according as the land is improved or imim- 
 proved. Then, too, only South Australia and Western 
 
 * The income derived from minerals, timber, and flax is, however, 
 taxable umder the income tax. And "if the Commissioner is of the opin- 
 ion that any land containing minerals or having standing timber or flax 
 thereon is not being worked or used in good faith and to an adequate 
 extent for the purpose of extracting the said minerals, or of cutting the 
 said timber or flax, such minerals, timber, or flax shall be excluded from 
 the provisions of this section (i.e., exemption) and land tax, both ordi- 
 nary and graduated, shall be assessed and paid." New Zealand, 7 Edw. 
 VII, No. 18, 22. 
 
 * Inasmuch as the tax for state purposes has been suspended in favor 
 of the local authorities, the consideration of the land taxation in New 
 South Wales will be reserved for the following sections dealing with the 
 local rating systems. 
 
 Tasmania, 1 Geo. V, No. 37, 2. 
 
 * South Australia, 4 Edw. VII, No. 861; 5 Edw. VII, No. 894. 
 Victoria, 2 Geo. V, No. 2327; 3 Geo. V, No. 2405, Schedules. 
 ^Western Australia, 7 Edw. VII, No. 15. 9, 10.
 
 42 THE TAXATION OF LAND VALUE 
 
 Australia have additional charges on absentee holdings; 
 twenty per cent on the total tax in the former, ^d. in the 
 pound additional in the latter state. In both states ab- 
 sence from the Commonwealth for one year previous to 
 the assessment constitutes absenteeism.* 
 
 It is significant that the amount of exemption from the 
 tax in case of small holdings is less in the Australian states 
 than in New Zealand. Thus no such exemption is allowed 
 in either South Australia '^ or in Tasmania; in Western 
 Australia land valued at 50 or less is exempt; while in 
 Victoria land whose value does not exceed 250 is not tax- 
 able, and the exemption, in case the value of the land ex- 
 ceeds 250, diminishes at the rate of 1 on every 1 of 
 such excess, leaving no exemption when the unimproved 
 assessed value amounts to or exceeds 500.' Thus, when 
 the value of the land is 275, the exemption is 225, when 
 the value is 450, the exemption is 50, etc. 
 
 The following special exemptions should be noted. In 
 Western Australia, a special exemption is accorded the 
 owner of improved land used for agricultural or like pur- 
 poses. In such a case a deduction of 250 from the as- 
 sessed unimproved value of the land is made. This deduc- 
 tion is made only once in case of an owner of several 
 estates.* Exempt are also in Western Australia condi- 
 tional purchasers, for five years from the date of con- 
 tract or date of survey, whichever is later. It is noteworthy, 
 however, that this exemption does not apply to holders of 
 more than 1000 acres of arable land, or more than 2500 
 
 * In South Australia absence from the state as well as from the Com- 
 monwealth suflSces to constitute absenteeism. Cf, South Australia, 8 
 Edw. VII, No. 804, 3; 4 Edw. VII, No. 861, 7. Cf. Western Australia, 
 7 Edw. VII, No. 15, 9. 
 
 South Australia, 47 and 48 Vic, No. 823, 8, 11. The payment of 
 the land tax exempts the owner from the tax on income accruing from the 
 land, except "so far as such income shall actually exceed 5 per centum 
 per annum on the unimproved value of the land." Ibid., 12. 
 
 Victoria, 1 Geo. V, No. 2284, 6, 7. 
 
 Western Australia, 7 Edw. VII, No. 15, 11 (3).
 
 LAND TAXES IN AUSTRALASIA 4S 
 
 acres of grazing land, or cultivable and grazing land to- 
 gether.^ In Victoria, at the discretion of the Commissioner 
 of Taxes, a release from the tax wholly or in part may be 
 granted in case of serious hardship resulting from losses 
 by bush fires, drought, floods, or similar calamities.' 
 
 Other provisions to be noted are: (1) No deductions are 
 allowed in case of land subject to a mortgage.' (2) In case 
 of leaseholds, the owner is held liable for the tax. For 
 example, the South Australian Act provides that no con- 
 tract or covenant should bind any person to pay the land 
 tax to the exoneration of any other person.^ In Victoria, 
 the Commissioner is empowered to determine the amount 
 of tax payable by the owner and lessee, respectively, if in 
 the opinion of the Commissioner the interest in the land of 
 the legal owner is lessened by the covenants of the lease.^ 
 (3) Life tenants and lessees of the Crown are deemed 
 owners of the fee-simple, and are therefore subject to the 
 tax. In such cases in computing the amount of tax account 
 is taken of the lessee's interest in the land. The determina- 
 tion of this interest, however, is often diflScult and some- 
 times the method of computation is stipulated in the Act. 
 Thus, in Western Australia,* the unimproved value of 
 Crown leases, where the right of purchase is not given, is 
 fixed at the difference in value between the capitalized 
 rental under the lease and the capitalized rental if let 
 "under such reasonable conditions as a bona fide lessee 
 would require, assuming the actual improvements (if any) 
 
 1 Western Australia, 7 Edw. VH, No. 15, 11. 
 
 Victoria, 1 Geo. V, No. 2284, 89. 
 
 ' In Victoria there is an exception to this provision in case of land 
 subject to a mortgage existing on September 80, 1910. If in that case 
 the land does not exceed 3000, an annual deduction from the land tax 
 is granted equal to one-fortieth part of the interest derived from that 
 proportion of the value of the mortgage as the unimproved value of the 
 land bears to its capital value (including improvements). Ibid., 50. 
 
 * South Australia, 67 and 58 Vic, No. 604, 18. 
 6 Victoria, 1 Geo. V, No. 2284, 39. 
 
 Western Australia, 7 Edw. VII. No. 15, 2 (c). ,
 
 44 THE TAXATION OF LAND VALUE 
 
 had not been made " (the interest rate assumed to be five 
 per cent). (4) The attempt to penaUze the owner of mi- 
 improved land is clearly shown in the Act of Western Aus- 
 tralia which allows a rebate of one-half the tax to the owner 
 of improved land.^ This provision necessitates a definition 
 of improved land which under that Act is as follows: (a) 
 agricultural land to be considered improved must have 
 improvements upon it equal to the value of one pound to 
 every acre of the land or equal to one-third of the unim- 
 proved value of the land; (6) urban land to be deemed 
 improved must have improvements on it equal to an 
 amount not less than one-third the unimproved value of 
 the land or equal to 50 per foot, etc. 
 
 10. In addition to this outline of the chief provisions 
 of the land-tax Acts in Austraha, a brief account of the his- 
 torical development of the systems will be profitable. It 
 must not be assumed from the account in the preceding 
 section that the great uniformity of levy shown above al- 
 ways existed in the land-tax laws of the different states. 
 The laws have undergone great modification, especially 
 those of Victoria and Tasmania. Victoria was the first 
 of the colonies to enact a land-tax law; this was in 1877.^ 
 But although its purpose was clearly the disintegration of 
 the large land holdings, the tax was not on the unimproved 
 value.' This is made evident from the provision that 
 owners of one or more landed estates an estate being a 
 parcel of land of more than 640 acres valued at more than 
 2500 pay a tax at the rate of 1, 5s. for every 100 of 
 the capital value of such estate over and above the sum of 
 2500.^ It is significant that to be taxable the land had to 
 
 1 Western Australia, 7 Edw. VII, No. 15, 10. 
 
 * Cf. Victoria, 54 Vic, No. 1107 (Revised Statutes). 
 
 ' The reason, however, cannot be said to have been ignorance of the 
 principle of the taxation of unimproved value for, as we mentioned above, 
 a tax on the unimproved value had been proposed in the Parliament of 
 Victoria as early as 1875. See supra, p. 24, and footnote. 
 
 * Victoria, 54 Vic. No. 1107, 3, 4.
 
 LAND TAXES IN AUSTRALASIA 45 
 
 extend more than one square mile and to have a value 
 above 2500. That made practically all urban land, as well 
 as all land of the poorer holders, exempt from the land tax. 
 
 That the tax did not fall on the unimproved value of the 
 land was due to the peculiar and crude system of valua- 
 tion provided for in the Act. The land was classified into 
 four categories according to its grazing capacity. Thus 
 land capable of carrying two or more sheep to the acre was 
 returned as first class, valued at 4 to the acre; land cap- 
 able of carrying three sheep to two acres and less than two 
 sheep to the acre was valued at 3 to the acre; land cap- 
 able of carrying one sheep to the acre and less than three 
 sheep to two acres was third class and valued at 2; and 
 land not capable of carrying one sheep to the acre was 
 valued at 1 per acre.^ It was held that such a system 
 worked in the interest of the speculative holder who al- 
 lowed his land to remain fallow, and that it acted as a dis- 
 couragement to the grazing industry because it penalized 
 the more industrious graziers.^ In spite of its ineffective- 
 ness this 1| per cent tax on estates over 640 acres whose 
 value exceeded 2500 remained in force for about a quar- 
 ter of a century, until the enactment of the Land Tax 
 Act, 1910,' which is modeled after the existing systems of 
 taxation on the unimproved value. 
 
 The land tax in Tasmania shows even more clearly a 
 development from (1) a part of the general property lev- 
 ied on the annual value, to (2) a realty tax levied on capi- 
 tal value, to (3) a tax on the imimproved value of the land 
 itself. The earliest charge on land was imposed in 1880 
 under the "Real and Personal Estate Duties Act." * The 
 
 1 Victoria, 54 Vic, No. 1107, 15. 
 
 ' " The land tax meant to hit the larger holders of property, and it has 
 hit twice as hard the men of moderate means." The tax fell on industry. 
 CJ. The Australasian, April 2, 1881, p. 432. 
 
 Victoria, 1 Geo. V, No. 2284. 
 
 * CJ. First Annual Report of the Commissioner of the Land Tax of the 
 Commonwealth of Australia (1912), p. 6.
 
 46 THE TAXATION OF LAND VALUE 
 
 rate of tax was 9d. in the pound on the annual value (rental) 
 of all lands. Occupiers other than owners were made liable 
 for the payment of the tax with power to recover from the 
 owners. The value of mortgages was not exempt, but the 
 mortgagors were empowered to recover from the mort- 
 gagees 9d. in the pound, calculated on the annual amount 
 of interest paid. Persons in possession of Crown land under 
 contract of purchase were liable according to the amount 
 of purchase money actually paid by them.^ In 1882 the 
 rate of tax was reduced to 6d. in the pound, but 
 was increased to 9d. again in 1885. 
 
 In 1888 2 the basis of levy was changed from the annual 
 to the capital value of landed property including improve- 
 ments, the rate being ^d, for every pound of value. This 
 Act underwent much revision in its minor provisions; but 
 in 1905 the proportional tax was replaced by a graduated 
 tax levied on the capital value of real property.^ 
 
 In 1909 a super-charge, an additional levy of one-fourth 
 part of the tax collectible under the previous Act, was 
 imposed.* 
 
 The change to the taxation on unimproved value took 
 place in 1910. In the accompanying table is set forth a 
 comparison of the graduated scales of rates charged under 
 the Acts of 1905 and 1910, respectively. 
 
 It must be borne in mind in examining the table that, 
 in 1905, the rate was on both land and improvements; in 
 1910, on the unimproved value. It will be noted that the 
 rate is now more than double the rate under the Act of 
 1905, and that this increase falls most heavily on vacant 
 land, without at the same time alleviating the burden 
 on the improved land. 
 
 * Cf. First Annual Report of the Commissioner of the Land Tax of the 
 Commonwealth of Australia (1912), p. 6. 
 
 * The Land Tax Act (1888), Tasmania, 52 Vic, No. SI. 
 
 Cf Tasmania, 59 Vic. No. 21, 3; 5 Edw. VII, No. 4, 8. 21. 
 
 * Tasmania, 9 Edw. VII, No. 10 {The Land Tax Super-Charge Act, 
 1909).
 
 LAND TAXES IN AUSTRALASIA 
 
 47 
 
 TABLE SHOWING THE RATES OF TAX IN TASMANIA 
 UNDER THE ACTS OF 1905 AND 1910 ^ 
 
 
 Rates oj 
 
 ' taxation 
 
 Capital value 
 
 
 
 
 Land and improve- 
 
 Unimproved value 
 
 
 ments, 1906 
 
 1910 
 
 under 2,500 
 
 id. in the pound 
 
 Id. in the pound 
 
 2,500 and " 5,000 
 
 hd. 
 
 lid. " " 
 
 " 
 
 5,000 " " 15,000 
 
 
 l^d. " " 
 
 i< 
 
 15,000 " " 30,000 
 
 Id. " " " 
 
 l|d. " " 
 
 < 
 
 80,000 " " 40,000 
 
 Id." " " 
 
 2d. " 
 
 < 
 
 40,000 " " 60,000 
 
 id." " " 
 
 2d. " " 
 
 < 
 
 50,000 " " 80,000 
 
 id. " " " 
 
 2id. " " 
 
 < 
 
 80,000 " above 
 
 Id. " " " 
 
 ihd. " " 
 
 Turning from the Tasmanian system to that in South 
 AustraHa, it is noteworthy that the land tax was from the 
 first levied here on the basis of the unimproved value. The 
 Act of 1884 imposed a tax of ^d. in the pound on the value 
 of the land.^ An additional tax on estates exceeding 5000 
 and an absentee charge were levied in 1894.' Slight 
 changes in rate were made from time to time fluctuating 
 from ^d. to jd. in the pound plus the super-charge and 
 absentee rate. The details of the rates have been epito- 
 mized as follows: * 
 
 1885-1894 d. in the pound on the unimproved value. 
 
 1895-1902 * |d. in the p>ound on the unimproved value, plus a fur- 
 ther id. in the pound on land over 5000, plus 
 absentee tax, 20 per cent extra. 
 
 1903 ' |d. in the pound, plus a further id. additional above 
 
 5000; absentee tax as fonnerly. 
 
 1904 ' id. in the poimd, plus ^d. extra above 5000, with 
 
 absentee tax as formerly. 
 
 1 Tasmania, 5 Edw. VII, No. 4, 8; 1 Geo. V, No. 37, 2. 
 South Australia, 47 and 48 Vic, No. 323, 8, 11. 
 IMd., 57 and 58 Vic, No. 604. 
 
 * Papers Bearing on Land Taxes, etc (Cd. 4750), 1909, p. 130. 
 South Australia, 2 Edw. VII, No. 804. 
 
 Ibid., 3 Edw. VIL No. 838. Ibid., 4 Edw. VII, No. 861.
 
 48 THE TAXATION OF LAND VALUE 
 
 1905 * f d. in the pound, plus f d. extra above 6000, with the 
 
 absentee tax, 20 per cent of total tax. 
 1906-1912 ' id. in the pound, plus ^d. extra above 5000, absen- 
 tee tax 20 per cent of total. 
 
 Another revision made in the South AustraHan law was 
 with regard to the definition of absenteeism. Under the 
 Act of 1894 an absentee was any one who had been absent 
 for at least two years immediately prior to the levy of the 
 tax.* It was stipulated that when at least three-fifths of the 
 interest in a company which owns land, or when at least 
 three-fifths of the interest in any land is held by absentees 
 the land should be considered as owned by absentees; but 
 any non-absentee shareholder should be entitled to a re- 
 fund of the amount overpaid by him. The Act of 1902 
 and the subsequent Acts have revised this section, substi- 
 tuting for the period of two years, one of twelve months. 
 
 The last state in Australia to introduce direct taxation 
 and the tax on unimproved value of land was Western 
 Australia (1907).* The chief provisions of the Act modeled 
 on the other laws have already been reviewed.^ 
 
 11. The systems of local rating on unimproved value 
 in Australia and New Zealand lack the discriminatory 
 features of the state levies and reveal their purely fiscal 
 character. The following, from a report on the "Unim- 
 proved Land Value Taxation in Queensland," con- 
 tains what may be termed the inception and evolution 
 of the idea of exempting improvements from taxation as it 
 
 1 South Australia, 5 Edw. VII, No. 894. 
 
 2 Ibid., 1 Geo. V, No. 1007. 
 
 * "Except in the case of life assurance societies doing business in 
 South Australia on the mutual principle, or in cases in which the whole 
 of the income from the land is paid to or for public or charitable purposes 
 in the colony." Cf. South Australia, 57 and 58 Vic, No. 604, 3. 
 
 * Western Australia, 7 Edw. VII, No. 15 {Land Tax and Income Tax 
 Assessment Act, 1907). 
 
 ^ See supra, 9. 
 
 " Papers Relative to the Working of Taxation on the Unimproved Value 
 of Land in Queensland (Cd. 3890), 1908, p. 20. Mr. Corrie, the author of 
 the report, was President of the Queensland Institute of Architects and 
 was for twenty-one years architect and valuer in Brisbane.
 
 LAND TAXES IN AUSTRALASIA 49 
 
 presented itself in the legislature in Queensland. It is a 
 system "educed, as the gradual development of legislation 
 proves, more or less subconsciously from the germ of the 
 idea . . . that a premium should be held out, or at worst, 
 no discouragement offered, to the improvement of the 
 imexploited lands of a new country. It is a system ... in- 
 tended to provide for some reasonable advantage accru- 
 ing to the land taxed." The conception, however, lay dor- 
 mant until 1890,^ when, for the purpose of meeting an 
 emergency measure to reUeve the consolidated revenue of 
 the state government, the local authorities were empow- 
 ered to levy rates on unimproved value. 
 
 The most significant characteristic of the Queensland 
 system is that practically all the local revenue is raised 
 from this source. All rates, general, special, and separate,* 
 are levied on the unimproved value. The adoption of this 
 system of rating is moreover obligatory. The general 
 rates must not exceed Sd. in the pound; nor may they be 
 less than id. in the pound. The Act provides, furthermore, 
 that the total amount of special rates (excluding all sep- 
 arate rates) shall not exceed 3d. in the pound.' Certain 
 special rates, for example. Special Water Rate, Special 
 Health Rate, Special Cleansing Rate, Special Loan Rate, 
 may be levied on the basis of the unimproved value of the 
 land, or upon some other basis so that the burden will be 
 distributed according to the benefit rendered.* The mini- 
 mum at which any separate portion of ratable land shall 
 
 ^ Mr. Corrie traces the beginning of the exclusion of improvements 
 from taxation to the "Divisional Boards Act of 1879." Cf. Papers 
 Relative to the Working of Taxation, etc., pp. 5jf. 
 
 * Special rates are levied to defray the cost of local improvements and 
 utilities and fall on all the land of the community; a separate rate is one 
 levied for a special benefit of some particular part of the locality and the 
 tax falls on that section alone. A special rate may also be a separate rate, 
 i.e., a "special assessment" but applicable to all the land. Queensland, 
 54 Vic, No. 24; 1 Edw. VII, No. 27; 2 Edw. VII, No. 19. 
 
 Queensland, 2 Edw. VII, No. 19, 209-23. Under the Act of 1890 
 (54 Vic, No. 24, 29) the maximum rate was id. for municipalities. 
 
 * Ibid.. 216-22.
 
 60 THE TAXATION OF LAND VALUE 
 
 be valued is 30 per acre in case of town and 20 in ease 
 of shire land; but in ease the same person is the owner of 
 two or more parcels of unoccupied land adjoining each 
 other, they shall be valued as one parcel.^ 
 
 Unique is the system of taxing public utilities corpora- 
 tions by means of the land tax. Private companies operat- 
 ing tramways, gas mains, electric lines, hydraulic mains, 
 are taxed on the land or public roads utilized by them; 
 but the basis of taxation is not the value of the land. For 
 example, for the operation of tramways a tax of l 10s. 
 on every 100 of the gross earnings of the vehicles of the 
 company running upon the lines is charged. In case the 
 lines extend over into another area the tax is made pro- 
 portionate to the mileage of the route under each local 
 authority.* 
 
 In considering the operation of this single tax on land 
 for local purposes, it must be remembered that the muni- 
 cipalities in Queensland exercise fewer functions of govern- 
 ment than the municipalities of our country for example. 
 Poor relief, orphanages, education, public libraries, police, 
 criminal prosecutions and prisons, hospitals and asylums, 
 death registration and like functions, are under state juris- 
 diction, paid for out of the consolidated revenue fund of 
 the state government.' It is important to note, on the 
 other hand, that the local governments of Queensland re- 
 ceive but a trifling "endowment" from the state govern- 
 ment * as compared with the local governments in the 
 other Australian states. 
 
 12. The "Rating on Unimproved Value Act" which 
 
 1 Queensland, 2 Edw. VII, No. 19, 195 (6, 7). 
 
 * Ibid., 196^. It is interesting to read the following proviso: 
 " The earnings from the running of special vehicles on any car route for 
 the conveniences of work-people may, at the discretion of the Local 
 Authority, be exempted from the provisions of this section, if the rate 
 charged per passenger does not exceed Id. per mile." 
 
 * Papers Relative to the Working of Taxation on the Unimproved Value 
 of Land in Queensland (Cd. 3890), 1908, p. 14. 
 
 * See infra, chapter in, 9.
 
 LAND TAXES IN AUSTRALASIA 51 
 
 passed the General Assembly of New Zealand ^ in 1896 
 differed from the Queensland Act chiefly in this respect; 
 it extended to the counties, municipalities, and other local 
 authorities the option of rating on the imimproved value 
 of the land, thus making optional what the Queensland 
 Act had made obligatory. The New Zealand measure 
 provides for the adoption of the system by a vote of the 
 ratepayers. The signatures of at least fifteen per cent * of 
 the ratepayers are required to petition for a vote, and a 
 majority of all the votes is necessary to institute the new 
 measure.' A rescinding proposal may be carried or rejected 
 in the same manner of voting as for adopting the proposal. 
 A proposal to rescind may only be demanded, however, 
 after the new rating system has been at least three years 
 in operation. Should the rescinding proposal be carried, 
 the old method of rating is again put into effect. After the 
 institution of one system a rescinding proposal may not be 
 submitted until three years have elapsed, nor may a vote 
 be taken whether to rescind or to adopt of tener than once 
 in three years.* 
 
 How have the local authorities in New Zealand re- 
 sponded to this privilege? Until 1914, 138 local authori- 
 ties had taken a poll on the proposal to rate on unim- 
 proved value.'' In 106 of these the measure was carried on 
 the first poll. In 8 boroughs the proposal was rejected on 
 the first vote, but was ultimately carried. Besides num- 
 
 ^ New Zealand, 1896, No. 5. A similar bill had been rejected several 
 years before. In 1893, such a proposal had passed the house, but met 
 defeat in the Legislative Council. New Zealand, Pari. Debates (1896), 
 vol. xcii, p. 631. 
 
 * The percentage varies with the number of ratepayers in the com- 
 munity. It is twenty-five per cent when the roll of names does not ex- 
 ceed 100; twenty per cent when it does not exceed 300. New Zealand, 
 1896, No. 5, 5. 
 
 As amended in Act of 1900, No. 18, 2. 
 
 New Zealand, 1896, No. 5, 10, 11. 
 
 ' Statistics of the Dominion of New Zealand, Printed by Authority 
 (Wellington, Mackay), 1911, pp. 659-83; Statistics of the Dominion of 
 New Zealand (1913), vol. iv, pp. 63-64.
 
 69 THE TAXATION OF LAND VALUE 
 
 erous smaller local bodies, 27 counties, 56 boroughs and 
 2 cities now rate on land value. ^ In 1913, the total number 
 of counties in New Zealand was 124, of boroughs 115, 
 showing that the new system is more prevalent in the 
 boroughs. In nine cases the attempts to rescind the meas- 
 ure were rejected. In only one locality, in North-East 
 Valley, was the proposal to rescind carried.* The two 
 cities now rating on unimproved value are the largest in 
 New Zealand, Wellington with a population of about 
 sixty-five thousand, and Christchurch with about fifty- 
 five thousand. 
 
 As regards the rate of levy, the Act merely provides 
 that, where prior to the adoption of rating on unimproved 
 value a hmit of rating-power was imposed upon the local 
 authority, the new rate should be such as to yield a reve- 
 nue equivalent to that under the previous system. The 
 Act stipulates that the rate of 1*. on annual (rental) value 
 shall be deemed equivalent to id. of the capital value.' 
 Until 1911 the option of rating on unimproved value did 
 not apply to water rates, gas rates, electric light rates, 
 sewage rates, or hospital and charitable rates. Upon the 
 vote of the ratepayers these rates may now be levied on 
 the unimproved value.* 
 
 The provisions of the South Australian Act ^ are similar 
 to those of the New Zealand Act. The adoption of rating 
 on the basis of imimproved value is made optional for any 
 municipality. A poll on the question may be taken upon 
 the petition of at least one-half the number of ratepayers.' 
 The rescission of such a proposal, after the system has been 
 
 * Statistics of the Dominion of New Zealand, supra. 
 
 * New Zealand, Statistics of the Dominion (1913), vol. IV, pp. 63-64. 
 Cf, also Papers Relative to the Working of Taxation, etc. (Cd. S19I), 1906, 
 pp. 25 Jf.; also (Cd. 4750), 1909, pp. 78, 135. 
 
 ' As amended in The Rating on Unimproved Value Amendment Act, 
 1903, No. 56. 2 (6); New Zealand, 1906, No. 5, 15. 
 
 * New Zealand, 1896, No. 5, 20; also 1911 (2 Geo. V), No. 11, 
 5 2. 
 
 8 South Australia, 56 and 57 Vic, No. 673. Ibid., 11. I
 
 LAND-TAXES IN AUSTRALASIA BS 
 
 adopted and in operation two or more years, is made pos- 
 sible upon a vote of at least one-half the number of rate- 
 payers.^ 
 
 13. The other Australian state whose experience with 
 rating on land value offers interesting study is New 
 South Wales. As pointed out before,^ a land tax for state 
 purposes had been in force in New South Wales since 1895. 
 The movement to extend the taxing powers of the local 
 authorities was the outgrowth of the larger scheme of local 
 government. The chief purpose of the "Local Govern- 
 ment (Shires) Act of 1905 " ' and of the " Local Govern- 
 ment Extension Act of 1906 " * was the organization of 
 the shires and municipalities in order to relieve the state 
 government from some of its functions. As the finances 
 of the state government were in a prosperous condition 
 and there was a surplus on hand,^ the suspension of the 
 state land tax in favor of the newly created shires and 
 municipalities was no hardship to the state government. 
 Accordingly, the above-mentioned Acts provided for the 
 rating on imimproved value by the local authorities and 
 for the suspension of the land tax for state purposes as 
 soon as the shire or municipaUty had levied the first gen- 
 eral rate under the new law.^ 
 
 The system of local rating in New South Wales, it is 
 noteworthy, is intermediate between those in Queensland 
 and New Zealand. In respect to general rates the tax is 
 obUgatory as in Queensland; in respect to special and other 
 
 South Australia, 66 and 57 Vic, No. 573, 30, 31. 
 
 * See supra, p. 41 footnote; New South Wales, 59 Vic, No. 15. The 
 Land and Income Tax Assessment Act of 1895 provided for a tax of Id. in 
 the pound of the unimproved value. An exemption of 240 (which in 
 the case of an owner of more estates than one was made only once) was 
 allowed. 
 
 New South Wales, Act No. 33, 1905. Ibid. 40, 1906. 
 
 ' The Australasian, August 5, 1905, p. 325; September 15, 1906, 
 p. 629. 
 
 C/. New South Wales, Act 33, 1905, 33 (2); Act 40, 1906, 65; Act 
 16, 1906: Parts xvin, xrs, xx, xxi, xxn. .
 
 54 THE TAXATION OF LAND VALUE 
 
 rates it is optional as in New Zealand. The levy of a gen- 
 eral rate, which is compulsory, shall not be less than Id. in 
 the pound, nor more than 2d. in the pound in the case of 
 shires; in the case of municipalities (Sydney excepted) 
 the minimum rate shall be Id. in the pound; while the maxi- 
 mum shall yield a sum not exceeding that yielded by a rate 
 of 9d. in the pound on the unimproved capital value plus 
 Is. 6d. in the pound on the assessed annual value. ^ Be- 
 side an additional general rate which is optional with the 
 municipality, special, local, ^ and loan rates may, at the 
 option of the Council, be levied on the unimproved value. 
 
 The following summary shows briefly which rates imder 
 the New South Wales system are compulsory, which op- 
 tional, and the manner in which the special rates may be 
 instituted: ' 
 
 " (a) Shire general rates must be only on the unimproved 
 capital value of land. 
 
 " (6) Municipal general rates must be only on the unim- 
 proved capital value of land. 
 
 "(c) Municipal additional rates may be either on the 
 unimproved capital value or on the improved capital value 
 at the option of the Council subject to the right of the rate- 
 payers to demand a poll of ratepayers on the question. 
 
 "(d) Both shire and municipal special, local, or loan 
 rates may be either on the unimproved or improved capi- 
 tal value subject to the right to demand a poll as above.'* 
 
 The City of Sydney, the metropolis of New South Wales, 
 was not subject to the rating provisions of 1906, because 
 it is under a separate constitution and government. Until 
 
 * "The assessed annual value of ratable land shall be nine-tenths of the 
 fair average rental of such land with the improvements (if any) thereon: 
 provided that such assessed annual value shall not be less than 5 per 
 cent of the unimproved' capital value whether improved or unim- 
 proved." Act 16, 1906, 134; also 150, 151. 
 
 * Local rate is a "special assessment" rate. Ibid., 153-58. 
 
 * Papers Relative to the Working of Taxation of the Unimproved Value 
 of Land in New South Wales (Cd. 3761), 1907, p. 5.
 
 LAND TAXES IN AUSTRALASIA 55 
 
 1908, all rates in Sydney were levied on the annual rental 
 of real property. But under the "Sydney Corporation 
 (Amendment) Act, 1908" the system of rating on the 
 changed basis was inaugurated.^ Accordingly, the coun- 
 cil is authorized to levy a general rate on the unimproved 
 value in addition to any rate already in force. That is, 
 part or all of the revenue of Sydney may now be raised by 
 the new method.^ The total amount leviable shall not 
 exceed the amount which would be yielded by a rate of 3d. 
 in the pound on the unimproved capital value and 23. in the 
 pound on the average annual value taken together, of all 
 the ratable property in the city. The general rate on un- 
 improved value shall not be less than Id. in the pound. 
 
 Thus it is evident that the major portion of the local 
 revenue in New South Wales which is contributed by the 
 general rates is raised by the tax on unimproved value. 
 Except for the alienated lands within the Western Division 
 of the state (not yet included under shire and municipality 
 areas),' the state land tax stands suspended, and the " en- 
 dowments" to the local governments have been reduced. 
 
 14. Besides the state and local land taxes, the federal 
 tax remains to be analyzed. In 1910, the Governor-Gen- 
 eral of the Commonwealth of Australia in his message to 
 the Houses of Parliament then assembled proposed the 
 taxation of land on its unimproved value in the interest of 
 closer settlement.* The proposal had been in the platform 
 of the Labor Party almost since the federation of the states 
 in 1901.^ The occasion, namely, the fiscal need, was, how- 
 ever, lacking. But when the "Labor Parliament" with a 
 
 * New South Wales, Act No. 27, 1908. "An Act to provide for levying 
 rates on the unimproved value of land in the City of Sydney," etc., 
 Partn. 
 
 Ibid., 4. 
 
 * The First Annual Report of the Commissioner of Land Tax of the 
 Commonwealth of Australia (1912), p. 4. 
 
 * Commonwealth of Australia, Pari. Debates, vol. lv (1910), p. 8. 
 
 * The Australasian, February 24, 1906, p. 455; April S, 1909, p. 849, 
 and elsewhere.
 
 M THE TAXATION OF LAND VALUE 
 
 majority in both Houses came into power, revenue for the 
 federal pension system, "^ as well as the encouragement of 
 denser settlement, was made the excuse. There is no 
 question, however, that the ulterior motive in the minds 
 of the legislators and their constituents was the subdivision 
 of the large estates, especially those belonging to absen- 
 tees. ^ 
 
 This purpose is apparent from the provisions of the Act 
 itself. Thus by far the most important clauses of the 
 "Land Tax Assessment Act, 1910" ^ are those which dis- 
 tinguish between the rate of tax on absentee and that on 
 non-absentee holdings and which exempt 5000 value in 
 case of the latter holdings. " The taxable value of all the 
 land owned by a person is 
 
 **(a) in the case of an absentee . . . the total sum of the 
 unimproved value of each parcel of land; 
 
 *\h) in the case of an owner not an absentee . . . the 
 balance of the total sum of the unimproved value of each 
 parcel of the land, after deducting the sum of 5000. 
 Every part of a holding which is separately held by any 
 occupier, tenant, lessee, or owner, is deemed to be a sep- 
 arate parcel." * 
 
 An absentee is one who does not reside in AustraUa or 
 in a territory under the authority of the Commonwealth, 
 and the word is defined to include a person who is absent 
 from Australia at the time of the assessment or who has 
 been absent more than half of the period of twelve months 
 
 1 The Australasian, February 24, 1906, p. 455 ; April S, 1909, p. 849, 
 and elsewhere. 
 
 * Commonwealth of Australia, Pari. Debates (1910), vol. lv, pp. 16, 
 18, 64, 140, 144, et passim. "Our policy is to break up the big estates and 
 to make room for immigrants. . . . We are desirous of breaking up these 
 huge estates because to the people this wealth belongs," etc. 
 
 Commonwealth of Australia, Nos. 21 and 22 of 1910, 11. 
 
 * The High Court has interpreted this to mean that an owner may be 
 taxed on the aggregate unimproved value of the parcels of land which he 
 holds less the sum of 5000. Cf. First Annual Report of the Commissioner 
 of Land Tax of the Commonwealth of Australia (1912), p. 14.
 
 LAND TAXES IN AUSTRALASIA 67 
 
 immediately preceding the assessment.^ Every absen- 
 tee, furthermore, must be represented by some person in 
 Australia. In case there is no authorized agent the person 
 who transmits income to the owner is held liable for the 
 tax. The public oflScer of the company ^ is held to be the 
 agent of an absentee shareholder who is subject to the land 
 tax. 
 
 In accordance with the intention of the law to hold all 
 persons who derive income from land of taxable value 
 liable as owners, some specifications with regard to lease- 
 holds, corporation holdings, and mortgaged land had to be 
 made. So with respect to leaseholds, if they antedate the 
 Act, the lessee pays the tax on the difference between the 
 capitalized value of the rent paid by him and the actual 
 unimproved capital value of the estate.' If his rent be four 
 and one-half per cent or more of the unimproved capital 
 value, he is not liable for the tax, the assumption being 
 that four and one-half per cent (the average earning rate 
 of mortgages) is a fair rental.* In case of a leasehold 
 acquired since the date of the Act, the lessee is deemed the 
 owner, although liable only to an amount proportionate to 
 his interest in the land.^ In order to make absentee share- 
 holders liable, the company is required to furnish the names 
 of the absentee shareholders and of the other shareholders 
 
 . Commonwealth of Australia, 1910, No. 22, 3. 
 
 * First Annual Report of the Commissioner of Land Tax, etc. (1912), 
 p. 8. 
 
 * In computing the imimproved value of the lessee's interest in the 
 land, the imexpired tenn of the lease must be taken into account. 
 
 * "The assumption appears reasonable that any earning value of a 
 property in excess of 4^ per cent (average earning rate of mortgages) 
 is attributable either to the improvements or the effective use made of 
 them by the person in occupation." Ibid. 
 
 ' Commonwealth of Australia, 1910, No. 22, 27. As the commissioner 
 of the land tax points out, the effect of this provision is that the owner of 
 an estate leased by him to another may, in his returns, omit the inclusion 
 of this estate with any other estates which he owns, thus evading the 
 payment of a higher rate that he otherwise would be liable for. Cf. First 
 Annual Report of tlie Commissioner of Land Tax, etc. (1912), p. 15.
 
 58 THE TAXATION OF LAND VALUE 
 
 who own more than 5000 worth of land, including other 
 land held by them, for the amount of taxable estate, and 
 the rate of tax varies with the kind of ownership, whether 
 absentee or non-absentee. The practice of the commis- 
 sioner of the land tax ^ is " to ascertain the unimproved 
 value of that part of a company's land corresponding to 
 a single share, then to require the company to supply the 
 department merely with the names of shareholders who 
 own shares to the number deemed worth the trouble of 
 assessment." The company is not regarded as an ab- 
 sentee; hence it is taxable only when the estate owned 
 by it is valued at more than 5000. With respect to mort- 
 gages, no deduction from the unimproved value of the land 
 is allowed. The mortgagor is deemed the primary tax- 
 payer except in case of bankruptcy when the mortgagee 
 comes in possession. ^ 
 
 In accordance with the provisions of the Act, the Fed- 
 eral Parliament fixed the following rates: ' (a) In case of 
 an owner not an absentee an exemption of 5000 is al- 
 lowed, above which value the rate of the tax is Id. on the 
 first pound of excess, increasing at a uniform rate, so that 
 the tax is equal to an average rate of l^d. in the pound on 
 an estate having a taxable value of 15,000, 2fZ. in the 
 pound when the taxable value is 30,000, 2^d. in the pound 
 when it is 45,000, 3d, in the pound when it is 60,000, 
 and S^d. in the pound when it is 75,000. In excess of 
 75,000 the rate of tax is Qd. in the pound. 
 
 (6) In case of an absentee no exemption is allowed; and 
 the rate of tax is Id. in the pound on the first 5000, 2d!. 
 on the first pound above 5000, the rate increasing after 
 
 * First Annual Report of the Commissioner of Land Tax, etc. (1912), 
 p. 9. 
 
 ' Commonwealth of Australia, 1910, No. 22, 31. 
 
 * The same schedules were readopted by the Parliament of 1911 and 
 1912. Cf Commonwealth of Australia, 1911, No. 12, and 1912, No. 37. 
 Toward the end of the session in 1914 the rate of the federal land tax was 
 increased. Cf. The Australian Worker, January 14, 1915.
 
 LAND TAXES IN AUSTRALASIA 
 
 59 
 
 that uniformly, so that it equals an average rate of 2id. 
 in the pound on the excess over 5000 when the taxable 
 value is 20,000, Sd. in the pound when it is 35,000, S^d. 
 in the pound when 50,000, 4d. in the pound when 65,000, 
 and 4|c?, in the pound when 80,000. When the taxable 
 value is in excess of 80,000, the rate of tax is 7d. in the 
 pound. 
 
 Reduced to tabular form these rates are as follows: * 
 
 RATES OF TAX INCREASING WITH EVERY POUND 
 OF TAXABLE VALUE 
 
 Non-absentee estate 
 
 Absentee estate 
 
 5.001 to 15,000, Id. to 114. 
 
 5,000 or less. Id. 
 
 
 15,000 " 30,000, l|d. " 2d. 
 
 5,001 to 20,000, 2d. 
 
 to 2H 
 
 80,000 " 45,000, id. " i^d. 
 
 20,000 " 35,000, 2^d. 
 
 " 3d. 
 
 45,000 " 60,000, 2^d. " 3d. 
 
 35,000 " 50,000, 3d. 
 
 " 3H 
 
 60,000 " 75,000, 3d. " 3^d. 
 
 50,000 " 65,000, 3U- 
 
 " 4d. 
 
 in excess of 75,000, 6d. 
 
 65,000 " 80,000, 4<f. 
 in excess of 80,000, 7d. 
 
 " m. 
 
 15. Summary: Through all the variety of legislation 
 thus far examined there run a few threads of agreement 
 corroborating the general analysis of the purpose of the 
 land taxes. The close resemblance which is apparent be- 
 tween the federal and the state taxes is evident also between 
 the different local systems. The mode of assessment and 
 scales of rates of the state and federal systems, moreover, 
 are distinctly differentiated from those of the local taxes. 
 The progressive scale of rates, the exemption of smaller 
 
 ^ It must be borne in mind that the rate changes with every excess 
 poimd of taxable value. The formulae to compute the rate on taxable 
 value below 75,000 and 80,000, respectively, are as follows: in case of 
 
 V 
 non-absentee: Rate = 1 plus ^^ <^; in case of an absentee estate: 
 
 oO,000 
 E 
 Rate = 2 plus n <^- V = the taxable value in pounds; E = the ex- 
 cess of taxable value over 5000, in pounds. Cf. Commonwealth of 
 Australia, 1910, No. 21, Schedules.
 
 eo THE TAXATION OF LAND VALUE 
 
 estates from the tax, the distinction drawn between the 
 absentee and the resident holder unmistakably reveal the 
 purpose of the taxes levied by the state and federal gov- 
 ernments. On the other hand, the uniform general rate of 
 levy, from which practically no landowner is exempt, the 
 abolition of other taxes, and the ordinary restrictions and 
 conditions laid down by the superior civic jurisdiction, the 
 state government, all point to the fiscal character of the 
 local systems of rating on the unimproved value. The 
 discriminatory feature of the state and federal land taxes 
 is wholly lacking in the local rates. This does not mean 
 that the latter method of raising revenue does not propose 
 to penalize the owner of idle land and to make the absen- 
 tee owner aid in bearing the burden of the expenditures 
 which tend to make his land more valuable. At the same 
 time the local rating systems on unimproved value are 
 proof that the taxation of land value must commend itself 
 to newly settled communities where land constitutes the 
 chief source of wealth and tends to appreciate in value.
 
 CHAPTER ni 
 
 LAND TAXES IN AUSTRALASIA (CONCLUDED) 
 
 1. From the very nature of the tax on the unimproved 
 value of land, the importance of accurate valuation of the 
 land apart from structures and other improvements is 
 obvious; yet the difficulty implied in finding the value of 
 the site itself, of the "original and indestructible powers 
 of the soil," seems well nigh insuperable. Indeed, were the 
 attempt made by the assessors to determine precisely the 
 value added to the land by virtue of every improvement 
 ever made thereon, the task would be a futile one and the 
 tax would be found impracticable. How, then, is the diffi- 
 culty of separate assessment of land and improvements 
 solved, if at all? For practical purposes the intricacies 
 and difficulties theoretically involved in the ascertainment 
 of the actual site value are disregarded in valuing the land 
 minus the improvements. A mean has been struck and a 
 standard adopted which makes the system of separate valu- 
 ation practicable for assessment purposes. In fact, for 
 other than taxing purposes, valuers have often found it 
 expedient to ascertain the value of the land separately 
 from that of the improvements. 
 
 But, granting the insuperable difficulty implied in sepa- 
 rate valuation, the importance of an approximately accu- 
 rate appraisal of the land cannot be overemphasized in 
 reference to a tax whose purpose it is to appropriate part 
 of the unearned increment and part of the ever-increasing 
 land value. Therefore, the experience with valuation of 
 property in Australasia deserves careful consideration. 
 
 It is at first somewhat disappointing to discover that no 
 strictly scientific system of land valuation has been evolved 
 in Australasia after decades of practice with land taxation.
 
 62 THE TAXATION OF LAND VALUE 
 
 That is, instead of applying objectively certain scientific 
 principles or rules of valuation governing land value, such 
 as have originated in this country,^ the taxpayers' returns 
 are in part rehed upon in a few of the Australian states, 
 while in all the states as well as in New Zealand, revalua- 
 tion is irregular and infrequent. The fact is, however, that 
 the empirical methods of land valuation seem to work 
 satisfactorily there and to present few of the diflficulties 
 of unequal assessments encountered in the United States. 
 The explanation lies in the more efficient administration 
 of the valuation departments in the colonies. 
 
 In Australasia the chief resources of the tax commis- 
 sioners in valuation and in verifying the self-assessed re- 
 turns of the taxpayer are: (1) the records of sale, a most 
 reliable check; (2) publicity, for the assessment book is 
 everywhere open to inspection; (3) disinterested assessors; 
 and (4) the system of government loans on land on the 
 basis of the valuation.^ 
 
 Altogether, therefore, judging from the official reports 
 we conclude that the system meets with general approval 
 and satisfaction. The reason seems to lie in the fact that 
 uniformity, if not accuracy, is attained, the latter depend- 
 ing upon the efficiency of the particular administrative 
 department. 
 
 2. Turning to the administration of the land tax, we 
 find that the tax Acts lay down certain regulations regard- 
 ing the organization of the department, and the methods 
 of assessment and collection of the tax. The chief guidance 
 of the assessor lies in the definitions in these Acts. The 
 fact that most of the taxes were modeled after antecedent 
 ones, after those of the New Zealand system especially, 
 will render the description of their administration in the 
 
 ^ For example, the Somers System or the Neill-Hoffman Rule. See 
 infra, chapter \n, 12, 13, 14. 
 
 * It is said that since the government loan system came into vogue, 
 the assessed value of land has in almost all cases exceeded the value for- 
 merly entered on the roll.
 
 LAND TAXES IN AUSTRALASIA 63 
 
 several states less complex. Speaking generally, the state 
 land taxes are under the direction of the Commissioner of 
 Taxes ^ who in all cases is the appointee of the State Gov- 
 ernor. The Commissioner of the Commonwealth Land 
 Tax is the appointee of the Governor-General. The chief 
 valuers, district valuers, and in some cases such assessors 
 as may be deemed necessary in the administration of the 
 tax, are likewise, with few exceptions, ^ appointed by the 
 respective Governors of the States, Dominion, or Com- 
 monwealth.' Under the local systems the council generally 
 appoints all the assessors. The advantages of appointed 
 assessors responsible to one chief as compared with elected 
 assessors responsible to the constituents whose property 
 they value are well recognized. Moreover, the Governors 
 are the appointed representatives of the Crown (although 
 they act with the advice of the Executive Council) * so 
 that the tax officials are further removed from party poli- 
 tics. The valuers and assessors, then, work in accordance 
 with the system laid down by statutory enactment, are 
 responsible to the government alone and are disinterested 
 as to the value set upon the land.^ Some of the statutes 
 
 ^ In Victoria there are three Commissioners of Taxes appointed by the 
 Governor-in-Council (i.e., with the advice of the Executive Council, the 
 Ministry). Cf. No. 1107, 1890, 10; 1 Geo. V, No. 2284, 4. In Tas- 
 mania the appointment is subject to the " Public Service Act." Cf. Tas- 
 mania. 2 Geo. V, No. 47, 8, 9. 
 
 2 Since 1896 the valuation department in New Zealand has been a 
 distinct institution, and separated from the tax and assessment depart- 
 ment. The Valuer-General is assisted by the district valuers, who with 
 their assistant valuers carry on the actual work of valuation and who are 
 in New Zealand appointed by the Public Service Commissioner. Local 
 valuers may be temporarily employed by the Valuer-General. The dis- 
 trict valuer, however, must approve of the valuation of the local valuer. 
 The valuer is employed at a yearly salary and is not permitted to under- 
 take any valuation or assessment for payment by an individual except 
 with the written consent of jthe Valuer-General. New Zealand Official Year 
 Book (1913), p. 844. 
 
 Cf. South Australia, 47 and 48 Vic, No. S23, 28, 29; Western 
 Australia, 7 Edw. VII. No. 15, 3; Tasmania, No. 47, 1911, 8, 9. 
 
 * The Executive Council consists of the Ministry of the party in power. 
 
 ' Papers Bearing on Land Taxes, etc. (Cd. 4750), 1900, pp. 146-47.
 
 64 THE TAXATION OF LAND VALUE 
 
 expressly stipulate that the valuers employed shall be ex- 
 pert, and shall have a knowledge of the general value of 
 the property in the locality.^ In New Zealand a distinct de- 
 partment, called the Valuation of Land Department, has 
 been created, at the head of which is the Valuer-General. 
 A similar department has been established by the central 
 government of Australia. 
 
 From the standpoint of efficiency and economy, it is 
 interesting to compare the centralized valuation system in 
 New Zealand with the duplicated valuations by the differ- 
 ent civic authorities in Australia. Before 1896 valuations 
 of land in New Zealand were made separately by the two 
 (central and local) taxing authorities as well as by other 
 departments of government ^ and no uniformity of method 
 existed. The state taxing jurisdiction employed a small 
 staff of valuers whenever a new valuation seemed desir- 
 able, while the local bodies and other departments, e.g., 
 the loan department, devised their own methods, and 
 employed their own valuers. At present, the Valuation of 
 Land Department under state jurisdiction supplies the 
 valuation data for all purposes, state, local and even pri- 
 vate. In Australia this unification has not yet been at- 
 tempted. Although the state Acts provide for cooperation, 
 
 * For example, " the district valuers shall be persons of reputed knowl- 
 edge of land values and improvement values," or "Assessors for the pur- 
 poses of this Act shall so far as practicable be persons having a local 
 knowledge of the value of land and of improvement values." Tasmania, 
 9 Edw. VII, No. 7, 7; Victoria, 1 Geo. V, No. 2284, 5; New South 
 Wales, No. 16, 1906, 137. 
 
 * Some purposes for which the District Valuation Roll is used are: 
 (a) Advances and investments on mortgage of land by or on behalf of 
 
 the New Zealand State-guaranteed Advances Office, the Public 
 Trust OflSce, the Government Insurance Department, the Post 
 Office, the Commissioner of Public Debts Sinking Fund Office. 
 (6) Stamp duties, etc. 
 
 (c) Claimants or Pensioners under Old-age Pensions Act. 
 
 (d) Board of Land Purchase Commissioners, etc. 
 
 (e) Maori Land Board and Native Land Court. 
 if) Crown renewable leases. 
 
 New Zealand Official Year Book (1913), p. 852.
 
 LAND TAXES IN AUSTRALASIA 65 
 
 authorizing the use of the local assessment rolls and other 
 records, and although the Commonwealth Land Tax De- 
 partment "supplies free of cost to state governments and 
 municipalities information as to the improved and unim- 
 proved values returned by landowners" ^ and is author- 
 ized in turn to seek information from any subordinate 
 government division, a taxpayer in Australia may be 
 called upon to make returns to all three authorities, local, 
 state, and federal. And because of differences in definition, 
 in law, and in method, no uniformity as regards valuation 
 is possible. 
 
 The valuer is supplied with data found in the Land 
 Transfer and Deeds Registry Office and with other evi- 
 dence affecting the value of the land. From these and 
 other information which he gathers he estimates the unim- 
 proved value, the value of the improvements, and the 
 total or capital value of the land. For the purpose of ob- 
 taining the needed information the commissioners and 
 valuers are empowered to inspect any documents, such 
 as records of sales, pertaining to the value of the land. 
 They may obtain detailed reports from local valuers, and 
 may inspect the land and elicit any information that 
 they may deem necessary.^ From the returns of the tax- 
 payer, supplemented by information from other available 
 sources, the assessment book is prepared.' The following 
 
 ' First Annual Report of the Commissioner of Land Tax of the Common- 
 wealth of Australia (1912), p. 12. "Negotiations are in progress with the 
 State Governments with the view to obtaining regular statements of 
 transactions relating to transfers of land." Ibid., p. 12. In the new "Rat- 
 ing on Unimproved Values Act" of 1914, the Victorian (state) land tax 
 assessment roll is to be used for local rates. Cf. Victoria, 4 Geo. V, No. 
 2478. 
 
 * "Every classifier appointed under this Act shall for the purpose of 
 executing his duties under this Act have power to enter at all reasonable 
 hours in the daytime into and upon any land and do such matters and 
 things thereon as may be reasonably necessary and may put to any per- 
 son in occupation or charge of any land . . . any questions which may 
 be necessary," etc. Victoria, 1890, No. 1107, IS. 
 
 * In Victoria this book is known as the Land Tax Register, 1890, No. 
 1107, 31.
 
 68 THE TAXATION OF LAND VALUE 
 
 are the usual particulars recorded on the assessment 
 roll: ' 
 
 1. A short description of, or reference to the land as- 
 sessed, 
 
 2. The actual value of the land assessed, 
 
 3. The unimproved value of the land assessed, 
 
 4. The amount of land tax, 
 
 5. The names and description of the taxpayers in re- 
 spect of the land assessment, so far as such names 
 and descriptions can be readily ascertained. 
 
 In general the assessment book contains both the im- 
 proved and unimproved value of the land in separate col- 
 umns.^ Both South Australia and Western Australia pro- 
 vide for additional assessment books to be prepared an- 
 nually. These, called in South Australia the Additional 
 Iiand Tax Register and the Absentee Land Tax Register, 
 contain the assessments upon which the additional and 
 absentee taxes are paid.' The commissioner is empowered 
 to make any alterations in the assessment, if he is of the 
 opinion that it is not correct. The taxpayer is notified of 
 the amount of assessment and the assessment book is then 
 made accessible for inspection. This feature of publicity 
 is of great importance in case of local assessment books, 
 since it enables the ratepayers to compare their own 
 assessments with those of their neighbors. 
 
 Should the owner or taxpayer dissent from the assessed 
 value of the land recorded on the assessment roll, he 
 may have recourse to the courts provided for in the Acts. 
 These courts, known by different names in the several 
 
 Sovth Australia, 47 and 48 Vic, No. 323, 37. 
 
 * The Tasmanian statute requires the following particulars to be re- 
 corded: (1) consecutive number; (2) description; (3) situation; (4) name of 
 owner; (5) name of occupier; (6) area; (7) value of improvements; (8) un- 
 improved value; (9) capital value. Tasmania, 9 Edw. VII, No. 7, 11. 
 
 South Australia, 57 and 58 Vic, No. 604, 6; Western Australia, 7 
 Edw. VII, No. 15, 34.
 
 LAND TAXES IN AUSTRALASIA 67 
 
 states,^ are specially created courts of appeal, the judges of 
 which are appointed by the Governors, ^ as are the tax com- 
 missioners. The Victorian statute, for example, requires 
 the court to consist of three members, one of whom shall 
 be a Judge of Coimty Coiu^s, or a Police Magistrate, while 
 the other two shall be persons possessing a knowledge of 
 the value of land and improvements.' This court is em- 
 powered to summon witnesses and to select a convenient 
 place for its sittings. Except on questions of law, the de- 
 cisions of the court of appeal are final. When the point 
 at issue is a purely legal one, however, an appeal to the 
 Supreme Court is possible. In New Zealand, indeed, an 
 appeal to the Supreme Court may be made even on a ques- 
 tion of fact, if the judge of the Magistrate's Court is satis- 
 fied that the amount of tax bona fide in dispute between 
 the objector and the commissioner exceeds 200.* 
 
 3. More important than the procedure of assessment 
 discussed above is the question of accurate valuation of 
 the land. With regard to the frequency of appraisal no 
 uniformity exists among the several states. The Local 
 Government Act of New South Wales provides for annual 
 valuations,^ while in Sydney the law provides for one val- 
 uation at least every five years.* Annual returns are made 
 in New Zealand ' but actual valuations of the land are in- 
 
 ^ In Victoria, called the Assessment Court; in Western Australia, Tas- 
 mania, and New South Wales, the Court of Review; in Queensland, the 
 Valuation Court. 
 
 * In New Zealand, one member of the Assessment Court may be 
 appointed by one or more local authorities of the district whose roll is 
 under dispute, but the appointee must not be a member of those local 
 bodies. New Zealand Official Year Book (191S), p. 854. 
 
 Victoria, 1 Geo. V, No. 2284, 23. 
 
 * New Zealand, 3 Geo. V, No. 10, 24. 
 
 New South Wales, No. 16, 1906, 135. 
 
 Ibid., No. 27, 1908, 6. The now suspended law in New South 
 Wales (1895) provided for quinquennial valuations of the land and an- 
 nual valuations of income. 
 
 "* In New Zealand no general valuations of land have been made since 
 1897, the practice being to have portions of the Dominion revalued from 
 time to time. New Zealand Official Year Book (1913), p. 858.
 
 68 THE TAXATION OF LAND VALUE 
 
 frequent, while in Queensland and South Australia valua- 
 tions are triennial. The latter state in 1902 amended the 
 provision for quinquennial valuations.^ But in accord- 
 ance with the provisions elsewhere noted, ^ additional 
 valuations for the absentee tax and for the additional 
 rates must be made annually in South Australia. In the 
 other states valuations take place at the discretion of the 
 commissioner, although in Victoria two years at least must 
 have elapsed between general valuations.' The Common- 
 wealth Act authorizes the commissioner, *' if, as, and when 
 he thinks fit," to cause valuation of any land to be made.* 
 The commissioners of Victoria will make a valuation for 
 public departments at their request, and for owners also, 
 provided the latter pay the fee of the valuer.^ 
 
 In providing specifically for returns by the taxpayer, 
 instead of for an objective appraisal of all the land, i.e., 
 in rem, some of the states have retained the antiquated 
 method of land assessment. That this method facilitates 
 inaccuracies and inequalities in assessment among the 
 different states and that it allows personal influences to 
 enter, is unquestioned. True, the valuers employ certain 
 checks ^ against undervaluations; nevertheless, the sys- 
 tem is unscientific and does not prevent inaccuracies. A very 
 important provision to check gross undervaluation is that 
 by which the government reserves the right to purchase 
 from the owner at the assessed valuation when the latter 
 is dissatisfied with the commissioner's estimate. Unques- 
 tionably under the New Zealand and the Commonwealth 
 Acts which provide for such acquisition, the owner is de- 
 terred from undervaluing his estate and from appealing 
 from the commissioner's estimate, lest the government 
 
 Cf. South Australia, 47 and 48 Vic, No. S23, 36, and 2 Edw. VII, 
 No. 782, 3. 
 
 ' See supra, chapter n, 10, chapter in, 2. 
 . Victoria, 1 Geo. V, No. 2284, 15. 
 
 * Commonwealth of Australia, 1910, No. 22, 17. 
 Victoria, 1 Geo. V, No. 2284. 72. 'See aupra, 1.
 
 LAND TAXES IN AUSTRALASIA 69 
 
 oflFer to purchase the land. In case of an app)eal by the 
 owner, "if the Justice (1) is satisfied that the owner has 
 understated the unimproved value of the land to the ex- 
 tent of twenty-five per cent or more, and (2) is not satis- 
 fied that the undervaluation was not made with a view of 
 evading taxation, he shall make the declaration applied 
 for," namely, to purchase the land on behalf of the com- 
 missioner.^ Under the Commonwealth Act the priority 
 of purchase is allowed the state in which the land in ques- 
 tion is situated. In New Zealand also the owner has the 
 option of accepting the higher value or of selling the land 
 to the government at that value, just as the government 
 retains the right of purchasing the land in case of an under- 
 valuation by the owner. For example, if the appeal of the 
 owner against the assessment fails to be sustained by the 
 assessment court, the owner may "within fourteen days of 
 the hearing, require the Valuer-General either to reduce 
 to the value which he considers to be the fair selling value, 
 or else, to purchase the property at that value.'* ^ On the 
 other hand, the Department, regardless of the decision of 
 the assessment court, may offer to purchase the property 
 if the owner refuses to accept the estimate of the valuer. 
 As an alternative another course of action is open to the 
 owner. He may ask for a revaluation of his land, which is 
 granted provided he pays the fee for such a valuation. 
 But in this case, if the last value fails to tally with the pre- 
 vious one, regardless whether it is more or less than the 
 first, the last appraisal is substituted on the roll as the cor- 
 rect value. 
 
 4. The considerations discussed in the preceding sec- 
 tions are, however, incidental details compared with the 
 fundamental problem of ascertaining an accurate valua- 
 tion of the site apart from all the improvements upon it. 
 For this purpose the chief guides of the assessor are the 
 
 * Commonwealth of Australia, 1910, No. 22, 48. 
 
 * Papers Bearing on Land Taxes, etc. (Cd. 4750), p. 155.
 
 70 THE TAXATION OF LAND VALUE 
 
 definitions of "capital value," "improvements,"" value of 
 improvements," and "unimproved value," the definitions 
 embodied in the Acts. 
 
 " Capital value," by which is always understood the 
 improved capital value of land, means "the sum which 
 the owner's estate or interest therein, if unencumbered 
 by any mortgage or other charge thereon, might be ex- 
 pected to realize at the time of valuation if offered for sale 
 on such reasonable terms and conditions as a bona fide 
 seller might be expected to require." ^ This is in other 
 words the selling or market price, which the assessor can 
 often ascertain from the records of sale and from inquiries 
 from realty dealers. The capital value differs from the 
 capitalized annual rental, the rental actually paid;^ and 
 it is obvious that the rental yielded by a dilapidated struc- 
 ture on first-class land, for example, is by no means a cri- 
 terion of the selling value of the site. Likewise with unoc- 
 cupied land which yields no rental at all. It is with rea- 
 son, then, that the taxation on "capital" is superseding 
 the taxation on "annual" value. But the adoption of the 
 principle of capital value as the basis of taxation involves 
 some difficulty as regards leaseholds, especially those of 
 long duration. In such cases an adjustment must be made 
 in consideration of the encumbered condition of the prop- 
 erty. What the method of adjustment is will be considered 
 hereafter. 
 
 Assuming that the capital value can be ascertained, it 
 follows from the definition that if you deduct the value of 
 all the improvements from the improved capital value, the 
 result is the unimproved capital value, and that is the tax- 
 able value. What, then, constitute improvements and how 
 is their value to be ascertained? To quote a few definitions: 
 ** 'Improvements' on land means all work done or mate- 
 
 1 New Zealand, 3 Geo. V, No. 15, 3; Cf. also Victoria, 1 Geo. V, No. 
 2284. S. 
 ' In Australasia, this is called annual value.
 
 LAND TAXES IN AUSTRALASIA 71 
 
 rial used at any time on or for the benefit of the land by 
 the expenditure of capital or labor by any owner or occu- 
 pier thereof in so far as the effect of the work done or mate- 
 rial used is to increase the value of the land, and the bene- 
 fit thereof is unexhausted at the time of valuation; but 
 does not include work done or material used on or for the 
 benefit of the land by the Crown or by any statutory pub- 
 lic body, except so far as the same has been paid for by 
 the owner or occupier either by way of direct contribution 
 or by way of special rates or loans raised for the purpose of 
 constructing within a coimty any road, bridge, irrigation 
 works, water-races, drainage works, or river-protection 
 works: Provided that the value of improvements made 
 out of loan moneys raised for the purpose of constructing 
 within a county any road . . . shall not exceed the amount 
 of principal estimated by the Valuer-General to have been 
 repaid by the owner in respect of any such loan by way of 
 special rates." ^ 
 
 "'Improvements' include houses and buildings, fenc- 
 ing, planting, excavations for holding water, wells, ring- 
 barking, clearing from timber, or scrub, or sweet briar, or 
 noxious weeds, or laying down in grass or pasture, and any 
 other improvements whatsoever the benefit of which is 
 unexhausted at the time of valuation." 2 
 
 Very similar definitions appear in all the Acts, but there 
 is no uniformity as to whether minerals,' timber, and other 
 products are to be included under improvements, that is, 
 to be deducted from the value of the land. For example, 
 the Victorian statute provides that the value of minerals 
 shall not be taken into accoimt in estimating the value of 
 the land, meaning by minerals, " all minerals, metals, coal 
 or precious stones existing on or beneath the surface of the 
 
 1 New Zealand, S Geo. V, No. 15, 3. 
 
 > New South Wales, 69 Vic, No. 15, 67. 
 
 * The question whether minerals, a wasting asset, should be considered 
 aa part of the value of the land or whether they should be deducted as 
 other products is of more than theoretic importance as will be shown later.
 
 72 THE TAXATION OF LAND VALUE 
 
 land." * Likewise, New Zealand exempts minerals as well 
 as timber and flax. But this proviso is made: "if the com- 
 missioner is of opinion that any land containing minerals 
 or having standing timber or flax thereon is not being 
 worked or used in good faith and to an adequate extent for 
 the purpose of extracting the said minerals, or of cutting the 
 said timber or flax, such minerals, timber or flax shall be 
 excluded from the provisions of this section and land tax, 
 both ordinary and graduated, shall be assessed and paid." ' 
 Under the Commonwealth Act, however, all minerals 
 imder private ownership,' except gold and silver, which 
 are specially reserved to the Crown and which can only be 
 removed by lessees of the Crown or by special agreements 
 with the owners, are part of the taxable, unimproved value.* 
 When minerals are included under imimproved land, the 
 difliculty of ascertaining their value is encountered, since 
 the value of minerals before the mine has been worked 
 can only be guessed at. Li such cases the valuer must not 
 only fix a speculative value for the unworked minerals, 
 but must deduct from such value any expenditures incurred 
 by the owner in boring, probing, and otherwise testing the 
 mine. 
 
 Having defined "improvements," the next query is 
 how to estimate their value. The " ' value of improve- 
 ments ' means the added value which at the date of valua- 
 tion the improvements give to the land." ^ Simple as this 
 definition sounds, it involves many practical diflBculties. 
 To ascertain the unimproved value of the land it is neces- 
 sary 
 
 (a) to deduct from the capital value the expenditure for 
 all improvements that have enhanced the value of the 
 
 1 Victoria. 1 Geo. V, No. 2284, 37. 
 
 * New Zealand, 7 Edw. VII, No. 18, 22. 
 
 * Mines held under leasehold from the Crown are not taxable. 
 
 * First Annual Report of the Commisaioner of Land Tax of Common- 
 wealth of AvMralixi, p. 16. 
 
 New Zealand, 3 Geo. V, No. 15, 3.
 
 LAND TAXES IN AUSTRALASU 78 
 
 land and only in so far as they have enhanced the value, 
 that is, should the expenditure have been made unneces- 
 sarily or wastefuUy without producing an appreciation in 
 value, such outlay is not deductible; 
 
 (6) to deduct the value of the outlay, if the benefit of 
 the improvement be unexhausted at the time of appraisal; 
 otherwise, that is, if the improvement no longer affects 
 the value of the site, irrespective of the original cost of 
 such improvement, no deduction shall be allowed; 
 
 (c) not to allow for any appreciation in value due to a 
 public improvement unless it has been paid for by a special 
 assessment levy; 
 
 (d) to allow only the original cost of the improvement 
 irrespective of the appreciation in excess of the cost.^ "It 
 is the actual improvement which is valued, not the effect 
 of that improvement. For instance, supposing that the 
 expenditure of a small sum in cutting an outlet for water 
 had converted a swamp into first-class agricultural land. 
 The fact that the swamp was capable of easy drainage 
 would enhance its unimproved value, and the cost only 
 of cutting the drain would be valued as the improve- 
 ment." 2 
 
 The difficulty of adjusting the relative values of the in- 
 terests in the land among the owner, lessee, and often sub- 
 lessee is met in various ways by the several states. In gen- 
 eral, the principle is adhered to that the owner of the 
 fee-simple shall be held liable for the tax. Nevertheless, to 
 respect contracts entered into prior to the enactment of 
 the tax, the lessee is sometimes deemed the owner. For 
 example, where the rental of a leasehold does not change 
 with the value of the land, and where the lessee binds 
 himself to pay all taxes, the latter may be held liable; for 
 
 ^ " Provided that the value of improvements shall in no case be deemed 
 to be more than the cost of such improvements estimated at the time of 
 valuation, exclusive of the cost of repairs and maintenance." Cf. New 
 Zealand Official Year Book (1913), p. 850. 
 
 Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, p. 150.
 
 74 THE TAXATION OF LAND VALUE 
 
 in that case the owner, it is assumed, would be unable to 
 recoup himself for the payment of the tax, while the lessee 
 would pocket the appreciated land value. On the other 
 hand, the possibility of reversion at the termination of the 
 lease presents another aspect of the question, for from this 
 standpoint the owner of the fee-simple may be deemed 
 the rightful taxpayer.^ In general, therefore, attempts are 
 made to compute the respective interests of lessor, lessee, 
 and sub-lessee, by taking into account (1) the unexpired 
 term of the lease, (2) the annual rent agreed upon, and (3) 
 the terms of the lease, as to the rights of renewal, compen- 
 sation, etc. 
 
 By reason of the agreements under leasehold, the capi- 
 tal value of leased land must often be determined by other 
 criteria than its unencumbered market value. For ex- 
 ample, under the Commonwealth Act the imimproved 
 value of leaseholds is ascertained by assuming that the 
 actual rental paid by the lessee is four and one-half per cent 
 of the unimproved value. This assumption is based on 
 the average rate on mortgages, which is held to represent 
 the earning value of the property; any excess over four 
 and one-half per cent is attributed to the improvements 
 or to the owner's exertions.'^ Or in Western Australia, 
 the unimproved value of land held under any leasehold 
 estate or interest from the Crown, without the right of 
 purchase, is computed at a sum "equal to twenty times 
 the excess of the amount of the fair annual rent at which 
 the land would let under such reasonable conditions as a 
 bona fide lessee would require, assuming the actual im- 
 provements (if any) had not been made, above the annual 
 rent . . . reserved by the lease." ' 
 
 1 New Zealand, 3 Geo. V, No. 10, 39; Victoria, 1 Geo. V, No. 2284, 
 39, 40. 
 
 * First Annual Report of the Commissioner of Land Tax of the Common' 
 wealth of Aiistralia, p. 8. In New Zealand "the fair market annual rental 
 of any property is assumed under the Act to be five per cent of its total 
 value." New Zealand Official Year Book (1913), p. 857. 
 
 Western Australia, 7 Edw. VII, No. 15, 2.
 
 LAND TAXES IN AUSTRALASIA 75 
 
 To complete the series of definitions laid down for the 
 guidance of the valuer, the meaning of "imimproved 
 value" is quoted from the New South Wales' Act of 
 1895.^ "'Unimproved value' means, in respect of land, 
 the capital sum for which the fee simple estate in such land 
 would sell, under such reasonable conditions of sale as a 
 bona fide seller would require, assuming the actual improve- 
 ments (if any) had not been made, and in case of condi- 
 tionally purchased land, of which no grant shall have been 
 issued, after deducting also the balances or amount of 
 purchase money due to the Crown in respect of the same: 
 Provided that the unimproved value of lands reclaimed 
 from the sea, or from any harbor or river, or made fit for 
 building purposes by leveling or quarrying, or by the erec- 
 tion of retaining walls, or by any similar operations or 
 works, shall be the capital sum for which the said land 
 would sell imder reasonable conditions, after deducting 
 from such sum the cost of reclamation or making, as well 
 as all other improvements." 
 
 It is clear from the above definition that "unimproved 
 value" means neither the "prairie" value of the land, nor 
 the present value of the bare land, regardless of the general 
 progress of the locality, of the public improvements, and 
 of the utilization of the adjoining area. All these influences 
 indeed do affect the unimproved values of the district. 
 In seeking to ascertain the unimproved value of some par- 
 ticular parcel of land, then, the valuer should view it in 
 relation to the surrounding land, assuming that the parcel 
 under consideration was alone unimproved. And the 
 amount by which the capital value of the property exceeds 
 the site value constitutes the value of the improvements. 
 
 5. Summarizing the general system of valuation, it is 
 necessary to point out that there are two methods of pro- 
 cedure in estimating the unimproved value of the land. 
 The one is to deduct the value of the improvements from 
 , New South Wales, 59 Vic, No. 15, 67.
 
 76 THE TAXATION OF LAND VALUE 
 
 the selling value; the other is to appraise the unimproved 
 value of the land directly, without regard to the value of 
 the improvements. To what extent the first, which is the 
 simpler and less scientific, process of computation, is prac- 
 ticed, it is impossible to say. The second method, however, 
 is theoretically the more correct one, and the one to which 
 the New Zealand Valuation Department aims to conform. 
 The valuer is there expected to ascertain separately the 
 imimproved value, the value of the improvements, and the 
 capital value of every parcel of land.^ With these three 
 values before him, he can check up his estimates. If, for 
 example, he finds that the combined estimates of the un- 
 improved value and the value of the improvements do not 
 equal the estimated selling or capital value, he must re- 
 adjust those values, bearing in mind that the value of the 
 improvements is the difference between the selling and the 
 unimproved values of the parcel. In this way there is more 
 prospect of attaining an accurate valuation than by the 
 first method referred to above. 
 
 There appears also in the Queensland statute ^ a sug- 
 gestion that the second method may be there employed. 
 The clause reads; "Except as hereinafter otherwise pro- 
 vided the value of any ratable land shall be estimated at 
 the fair average value of unimproved land of the same quality 
 held in fee-simple in the same neighborhood." Elsewhere, 
 also, there is a recognition that the unimproved value of 
 any piece of land is related to the value of the other land 
 in the community. "It is, however, assumed," says the 
 federal Commissioner of Land Tax, Mr. McKay,' "that 
 the property under valuation has its present day environ- 
 ment and is subject to all communal influences that affect 
 value. Whatever is due to such communal influence is tax- 
 
 1 New Zealand Official Year Book (1913), p. 846. The valuer is expected 
 to regard each piece of land "as if it alone had not been improved at the 
 date of the valuation." 
 
 * Queensland, 2 Edw. VII, No. 19, 195. (Italics mine.) 
 
 First Annual Report of the Commissioner, etc., p. 14. (Italics mine.)
 
 LAND TAXES IN AUSTRALASIA 77 
 
 able as part of the unimproved value." And yet, in spite of 
 this recognition of "community value," no "cadastral" 
 system of scientific valuation based thereon has been 
 developed in Australasia such as is beginning to be em- 
 ployed in this country.^ 
 
 To what degree of accuracy the valuers attain under 
 the system of valuation in Australasia it is difficult to say. 
 Much depends upon the efficiency of the administration. 
 According to the official reports ^ the system of valuation 
 in New Zealand is said to be efficient. Several factors, as 
 already noted, have operated to produce this result. First, 
 the assessments are used not only by the government in 
 granting loans, but by "trustees, executors, private lend- 
 ers and purchasers," and for other purposes. Second, the 
 government retains the option of purchase in case of dis- 
 agreement between the owner's and the commissioner's 
 estimated value. Third, the assessment roll is used for 
 local purposes and is open to the owners for inspection and 
 comparison of one another's valuations. Fourth, the valu- 
 ing department is centralized and the officials are respon- 
 sible to the department, not to party constituents. 
 
 Nevertheless, that the system in South Austraha does 
 not attain accurate returns is attested by the following 
 statement from the report of the First Commissioner of 
 Taxation.' "There has throughout been no straining after 
 high values. Valuators have been instructed to give fair 
 and uniform values, founded as far as possible on sales, 
 and on values generally recognized in each particular 
 locality. This is the principle that has been aimed at, and 
 
 * Cf. infra, chapter vn, 12. 
 
 Cf. Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, pp. 146-47. 
 Also pp. 78-79. " Although there has been a considerable rise in assess- 
 ments generally since the valuing department has been fully organized, 
 there does not appear to be any widespread discontent with, or distrust 
 of it. The Treasury and the municipal bodies have received better 
 returns, but there is no reason to suppose that the property owners have 
 been oppressively assessed." 
 
 Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, p. 129.
 
 78 THE TAXATION OF LAND VALUE 
 
 the fact that the assessment for the city of Adelaide comes 
 out at 9,558,452, being 5,467,548 or more than one-third 
 less than the latest Parliamentary estimate for it, may, I 
 think, be taken as some evidence that, at all events, ex- 
 treme values have not been resorted to." The Commis- 
 sioner of the Commonwealth Tax reports as follows con- 
 cerning the first valuation made: ^ "The fact remains 
 that some of the shire unimproved values are, in the opin- 
 ion of the departmental valuers, far below the actual sale 
 value of the land, which is the true taxing value. The land- 
 owning class is often directly represented on the shire coun- 
 cil, and there is a tendency on the part of bodies so consti- 
 tuted to limit the values, and the consequent tax, for local 
 government purposes." The evidence is general that the 
 system of land valuation, taking Australasia as a whole, 
 lacks scientific accuracy and expertness, although uni- 
 formity in valuation, and therefore a certain degree of 
 efficiency, is there attained. 
 
 6. The consideration of the administration of the land 
 tax raises the question of its fiscal importance. It is a 
 well-known paradox that an evident incompatibility exists 
 between the fiscal and social interests when taxation is 
 employed to check or prevent a social ill. For example, 
 the federal tax of ten per cent on note issues of state banks 
 is prohibitive and wholly unproductive as a source of 
 revenue. Or, a protective tariff, if wholly effective, would 
 yield a comparatively trifling revenue. So in judging of 
 the efficacy of the land taxes from the revenue receipts we 
 must bear in mind the purpose of the taxes. ^ According to 
 the analysis in the preceding chapter, the purpose of the 
 state and federal taxes was not the same as that of the local 
 systems, the former aiming at disintegration, the latter at 
 
 * First Annual Report of the Commissioner of Land Tax, etc. (1912), 
 p. 10. 
 
 * The following quotation shows this incompatibility well: "Mr. 
 Berry declares that he would be delighted if within twelve months every 
 large estate was divided so that the tax did not bring in a shilling into the 
 revenue." The Australasian, April i, 1881, p. 432.
 
 LAND TAXES IN AUSTRALASIA 
 
 79 
 
 revenue. This fact must be borne in mind in treating of 
 the fiscal aspect of the taxes. 
 
 It may well be, however, that a tax may prove at one 
 and the same time a productive source of revenue and an 
 agent of social reform. Thus, the Australasian graduated 
 land tax may not have disintegrated the large estates, nor 
 the absentee tax prevented absenteeism; nevertheless, it 
 may have acted as a discouragement to both and have 
 made the large estates bear a heavier burden so long as 
 they endured. At the same time the tax may have estab- 
 lished itself as a permanent part of the fiscal system. In 
 the following sections, then, we shall attempt to discover 
 the expediency of the tax on unimproved value as a fiscal 
 measure. 
 
 7. Tables I and II below show the revenue yielded 
 over a period of sixteen years by the land taxes levied for 
 
 TABLE I. RECEIPTS FROM THE DOMINION LAND 
 TAX IN NEW ZEALAND 1 
 
 
 
 
 
 
 Per cent of 
 
 Year 
 
 Ordinary 
 
 Graduated 
 
 Absentee 
 
 Total 
 
 total land 
 
 tax 
 
 tax 
 
 tax 
 
 receipts 
 
 tax to total 
 
 
 
 
 
 
 tax revenue 
 
 1897-98... 
 
 193,348 
 
 73,353 
 
 586 
 
 267,287 
 
 
 1898-99... 
 
 231,871 
 
 83,220 
 
 962 
 
 298,053 
 
 
 1899-00... 
 
 215,955 
 
 76,683 
 
 990 
 
 293,628 
 
 10.16 
 
 1900-01 . . . 
 
 222,353 
 
 71,406 
 
 825 
 
 294,584 
 
 9.68 
 
 1901-02... 
 
 233,545 
 
 78,214 
 
 1,076 
 
 312,835 
 
 10.05 
 
 1902-03... 
 
 217,307 
 
 77,832 
 
 923 
 
 296,062 
 
 9.03 
 
 1903-04 . . . 
 
 232.774 
 
 98,681 
 
 3,536 
 
 334,991 
 
 9.18 
 
 1904-05... 
 
 254.727 
 
 94,703 
 
 3.425 
 
 352,855 
 
 9.40 
 
 1905-06... 
 
 277.144 
 
 104,949 
 
 8.663 
 
 385,756 
 
 10.04 
 
 1906-07... 
 
 317.176 
 
 125,929 
 
 4,237 
 
 447,342 
 
 10.49 
 
 1907-08... 
 
 346.166 
 
 186,000 
 
 5,680 
 
 537,846 
 
 11.58 
 
 190a-09... 
 
 889.844 
 
 209,248 
 
 5,809 
 
 604,901 
 
 13.82 
 
 1909-10... 
 
 417,668 
 
 220,044 
 
 4,558 
 
 642,270 
 
 15.13 
 
 1910-11... 
 
 416,426 
 
 209,493 
 
 2,804 
 
 628,723 
 
 12.99 
 
 1911-12... 
 
 439,398 
 
 205,114 
 
 2,503 
 
 647,015 
 
 12.21 
 
 1912-13... 
 
 475.281 
 
 251,275 
 
 2,080 
 
 728,636 
 
 13. 
 
 * Compiled from the following sources: Papers Bearing on Land Taxes, 
 etc. (Cd. 4750), 1909, p. 74; New Zealand Official Year Book (1909),
 
 THE TAXATION OF LAND VALUE 
 
 TABLE 11. REVENUE FROM THE STATE LAND 
 TAXES IN THE AUSTRALIAN STATES ^ 
 
 Year 
 
 N.S. Wales 
 
 S. Australia 
 
 W. Australia 
 
 Victoria* 
 
 Tasmania* 
 
 1897-98... 
 
 364,181 
 
 81,508 
 
 
 115,451 
 
 37,226 
 
 1898-99... 
 
 253,901 
 
 77,622 
 
 
 108,745 
 
 37,577 
 
 1899-00... 
 
 286,227 
 
 78,404 
 
 
 108,722 
 
 38,866 
 
 1900-01 . . . 
 
 288,369 
 
 79,908 
 
 
 97,948 
 
 38,915 
 
 1901-02... 
 
 301,981 
 
 76,350 
 
 
 97,862 
 
 39,337 
 
 1902-03... 
 
 314,104 
 
 105,024 
 
 
 92,867 
 
 41,862 
 
 1903-04... 
 
 322,246 
 
 77,369 
 
 
 106,445 
 
 50,881 
 
 1904-05... 
 
 332,530 
 
 115,032 
 
 
 97,840 
 
 54,151 
 
 1905-06... 
 
 336,785 
 
 94,374 
 
 
 103,556 
 
 54,776 
 
 1906-07... 
 
 345,497 
 
 90,200 
 
 
 92,438 
 
 56,065 
 
 1907-08... 
 
 178,889 
 
 93,762 
 
 11,140 
 
 89,496 
 
 57,742 
 
 1908-09... 
 
 80,794 
 
 92,158 
 
 33,120 
 
 85,559 
 
 69,651 
 
 1909-10... 
 
 9,066 
 
 94,126 
 
 34,344 
 
 114,357 
 
 79,021 
 
 1910-11... 
 
 7,438 
 
 135,614 
 
 87,871 
 
 210,640 
 
 64,932 
 
 1911-12... 
 
 6,479 
 
 118,725 
 
 45,166 
 
 293,823 
 
 81,234 
 
 * The land tax in Victoria and Tasmania was levied on the improved value until 
 WlO-11. 
 
 state purposes. In Table I, we note an increase, during 
 the interval, 1897-1913, of about 145 per cent in the ordi- 
 nary tax, of about 242 per cent in the graduated tax, and 
 of about 255 per cent in the absentee tax, while the total 
 receipts from all three taxes in New Zealand show an in- 
 crease of about 172 per cent. In considering the increase 
 in the receipts of the ordinary tax, which of course consti- 
 tutes the most substantial portion of the land tax, it is 
 significant to note that the appreciation in the unimproved 
 value of the land upon which the tax is levied was during 
 the same period over 152 per cent.^ This shows a rough 
 
 p. 691; New Zealand Official Year Book (1912 and 1913); Statistics of the 
 Dominion of New Zealand (1910). 
 
 * Compiled from the following sources : Official Year Book of the Common- 
 toealth of Australia, vol. i (1901-07), and vol. v (1901-11) ; Coghlan, Statis- 
 tical Account of Australia and New Zealand (1903-04); Victorian Year 
 Books; Statistical Register of the State of South Australia, for years 1903-1 1 . 
 
 The unimproved value was, in 1897, 84,401.244; in 1913, 212,- 
 068,468. New Zealand Offi/dal Year Book (1913), p. 859.
 
 LAND TAXES IN AUSTRALASIA 81 
 
 correspondence between receipts and the value of the land, 
 the rate of tax having remained the same. Again, keeping 
 the changes in the rate of the graduated and absentee taxes 
 in mind, the rise in yield of the graduated tax, in 1903-04, 
 and from 1907-08 on (see column 3), is noteworthy, for in 
 those years the tax rate was increased. A comparison of 
 the total receipts since 1907-08 ^ (colunm 5) makes clear 
 the heavy burden which now falls upon the large holders 
 and which they prefer to bear rather than to dispose of 
 their estates. On the whole the receipts from the graduated 
 and absentee taxes show great fluctuations and are imlike 
 the more steady increase of the ordinary tax. The fact that 
 the revenue from the graduated tax has increased may be 
 regarded as proof of the ineflScacy of the tax to disintegrate 
 the large holdings. But the effect on absenteeism, judging 
 from the receipts from absentees, is significant. Since 
 1910, when the absentee rate of tax was increased from 
 twenty per cent to fifty per cent, the receipts as shown 
 in colunm 4 have been growing less. This may signify 
 that the number of absentee owners of the very large es- 
 tates, at any rate, is decreasing as a result of the heavy 
 burden of the discriminatory tax. 
 
 From the last column of the table, showing the propor- 
 tion that the total receipts of the land tax bear to the 
 total tax revenue of the central government, it is clear 
 that the land tax constitutes but a small proportion of the 
 tax receipts, and a very much less proportion of the whole 
 budget.'^ The slight variations in the proportion which 
 on the whole tends to increase show, however, that the 
 land tax has become an integral and permanent part of 
 the fiscal system. Compared with the yield of the income 
 tax, the land tax is, indeed, more productive; for example, 
 
 ^ The great increase in receipts for 1909-10 can be explained only by 
 the fact that the additional rate came into effect on March 30, 1910, 
 before the fiscal year had ended. 
 
 * The revenue derived from taxation was, in 1911, 4,837,322, the total 
 revenue 10,297,273. The New Zealand Official Year Book (1912), p. 763.
 
 82 THE TAXATION OF LAND VALUE 
 
 in 1908-09, the revenue of the land tax was almost dou- 
 ble that of the income tax, 604,901, as compared with 
 321,044.1 
 
 Turning to Table II we fail to note the same steady in- 
 creases in receipts in some of the states as were found in 
 New Zealand. The fluctuation in receipts shows in part the 
 effect of the revisions in the Acts. For example, the fall in 
 yield in New South Wales since 1907-08 is obviously attrib- 
 utable to the suspension of the tax in favor of the local 
 governments. With regard to the great increases in revenue 
 in South Australia, in 1902-03 and 1904-05, it will be re- 
 called that an additional rate was levied in those years. 
 The explanation of the enormous increase in 1910-11 over 
 all previous years is that there was a new assessment in 
 1910 and the ratable value of the land had increased 
 from 68,214,887 in 1910 to 75,943,584 in 1911.2 Land 
 "booms" and the subsequent depressions in value may 
 be responsible for some of the fluctuations noticeable, e.g., 
 the proceeds for 1898-99 show a decided decrease in land 
 value in New South Wales, South Australia, and Victoria. 
 Compared with the total tax revenue for the year 1906-07, 
 the last year before the suspension of the tax, the land 
 tax in New South Wales constituted about twenty-five 
 per cent of the total tax receipts, in South Australia about 
 twenty-two per cent, and in Western Australia (1910-11) 
 about eleven per cent. When we consider, however, that 
 all tax receipts form a very small percentage of the total 
 revenue, 7.42 per cent in New South Wales, 13.05 per cent 
 in South Australia, and only 8.45 per cent in Western Aus- 
 tralia,' the insignificance of the land tax, fiscally consid- 
 ered, becomes obvious. 
 
 The revenue receipts shown in the table for Victoria and 
 
 The New Zealand Official Year Book (1909), p. 691. 
 
 * Offixdal Year Book of South Atistralia (1913), p. 168. Statistical Regis- 
 ter of the State of South Australia (1911), pt. vi. 
 
 Qfficicd Year Book of the Commonwealth of Australia (1901-11), p. 815.
 
 LAND TAXES IN AUSTRALASIA 83 
 
 Tasmania until 1910-11 represent the yield of the realty 
 tax, not of the tax on unimproved value. The change to 
 the latter mode of taxation has brought some interesting 
 variations in receipts. It is noteworthy that in 1910-11, 
 the first year of the tax on land value in Victoria, the 
 revenue nearly doubled, and that in the last year shown 
 in the table, the increase over the preceding year was more 
 than 39 per cent. This is to be accounted for by the pro- 
 vision abolishing the liberal exemptions formerly allowed. 
 In Tasmania, the exemption of improvements, formerly 
 taxable, caused a diminution in the taxable base, reduc- 
 ing the yield of the tax in spite of the increase in the rates 
 of the graduated scale. But, the decrease in receipts was 
 slight in view of the fact that a special super-tax had 
 been levied in 1909-10.^ The following year, however, the 
 deficit was more than made up, as will be noted. In both 
 states the change to the new system has been fiscally ad- 
 vantageous. As regards the tax in Western Australia, its 
 steadily increasing yield is noteworthy, but as has been 
 shown, it constitutes a very small percentage of the whole 
 budgetary revenue. 
 
 8. From the fiscal standpoint the federal land tax is 
 as unimportant as the state taxes. Since its levy the tax 
 has yielded the following revenue i^ 
 
 1910-11 1,404,969 
 
 1911-12 1,445,260 
 
 1912-13 1,385,024 
 
 Comparing these receipts with the total revenue re- 
 ceipts of the Commonwealth, we find that the land tax 
 constituted (1911-12) about six per cent of the whole. 
 
 The following report of the particulars of the land-tax 
 assessment is for our purpose very significant:' 
 
 Statistics of the State of Tasmania (1913-14), p. 332. 
 
 * Commonwealth of Australia, Official Statistics, Monthly Bulletin No. 
 12 (December, 1912), p. 31; Bulletin No. 24 (1913), p. 40. 
 
 ' Official Statistics, Commonwealth of Australia, Monthly Bulletin 
 No. 12 (December, 1912), p. 34; Finance Bulletin. No. 5 (Summary 
 1901-11), p. 13.
 
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 86 THE TAXATION OF LAND VALUE 
 
 It will be noted that the tax charged on rural land was 
 more than twice the amount collected on urban land. It 
 is in the country, of course, where the large holdings exist. 
 There were in all 13,387 ^ taxpayers and of these about 
 one-sixth were absentees. The area owned by these 13,- 
 387 persons was 72,528,271 acres, giving an average of 
 5418 acres to the person. There were 146 owners, the un- 
 improved value of whose estates taken individually ex- 
 ceeded 100,000. Of the total revenue, it will be noted. 
 New South Wales paid more than half, 50.8 per cent, the 
 percentage of taxable area in that state to the whole tax- 
 able area being 58.4,^ Although New South Wales has the 
 largest population of all the Austrahan states, its terri- 
 tory is about one-half that of Queensland and about one- 
 third that of Western Australia, showing that the con- 
 centration of land in the hands of comparatively few is 
 greater in New South Wales than elsewhere in the Com- 
 monwealth. The conditions of tenure in relation to the 
 land-tax assessment are shown in the accompanying table 
 on page 87. 
 
 The average rate of tax was 2.92<i. in the pound (not 
 quite one and one-fourth per cent) ; and it will be recalled 
 that all resident owners were allowed an exemption of 
 5000. Considering that the total number of taxpayers 
 was about three-tenths per cent of the entire population 
 of the Australian Commonwealth, the discriminatory 
 character of the tax becomes apparent. 
 
 A very important consideration in judging the expe- 
 diency of a tax is the cost of collection and administration. 
 It is interesting to note, therefore, that the cost of collec- 
 tion of the Commonwealth land tax, the first year of its 
 operation, was one and one-fourth per cent of the revenue 
 collected; while the entire cost of its administration, much 
 
 * See footnote to table, p. 85. 
 
 ' Monthly Summary of Australian Statistics, Bulletin No. 12 (December, 
 1912), pp. 34-35.
 
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 <1 
 
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 ^ 
 
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 s^ a 
 
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 88 THE TAXATION OF LAND VALUE 
 
 of which expenditure will of course never recur, was three 
 and one-half per cent.^ When we consider the vast extent 
 of territory under the jurisdiction of the Commonwealth 
 Land OflBce, this amount is, indeed, very trifling. In New 
 Zealand, for the year 1908-09, the cost of valuation and 
 collection of the Dominion land tax was 3.82 per cent of 
 the total yield; while the administration and assessment 
 of the income tax was 2.05 per cent.^ It will be remem- 
 bered in this connection that the yield of the land tax was 
 nearly double that of the income tax, while the number 
 of taxpayers of the land tax was nearly three times the 
 number of those who were liable to income tax.' 
 
 9. As will be surmised, the fiscal problems presented 
 by the system of rating on unimproved value in the local 
 bodies in Australasia are unlike those dealt with above. 
 As we have shown, the state governments depend upon 
 other sources of revenue besides direct taxation; the local 
 divisions, on the other hand, axe in the main dependent 
 for approximately the entire budget upon the rates levied. 
 When, therefore, a community adopts a single tax on the 
 unimproved value of the land for local revenue, the ques- 
 tions which at once arise are: Is the tax a sufficient source 
 of revenue? Is it convenient, certain, elastic? 
 
 In order to be able to compare the working of the Single 
 Tax on unimproved value with the fiscal systems in the 
 other local authorities, some important data relative to 
 the fiscal policy in the several states are presented in the 
 following table: * 
 
 The chief difference to be noted in the above systems of 
 
 * First Annual Report of the Commissioner of the Land Tax of the Com- 
 monwealth of Australia (1912), p. 25. 
 
 2 The New Zealand Official Year Book (1909), p. 691. 
 There were 30,855 payers of knd tax, and 10,839 of income tax in 
 1908-09. Ibid. (1913), p. 783. 
 
 * Official Statistics, Commonwealth of Australia, Finance Bulletin 
 No. 4 (1901-10), p. 29.
 
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 90 THE TAXATION OF LAND VALUE 
 
 local finance is in respect to the taxable value upon which 
 rates are levied. New South Wales and Queensland rating 
 on the unimproved, the other four states ^ on the capital 
 or annual value of both land and improvements. New 
 South Wales has the largest budget, Queensland coming 
 third. It will be observed that the government grant to 
 Queensland is very small, and while that to New South 
 Wales is yet the largest endowment, there is reason to be- 
 lieve that the tendency will be to reduce the grants when 
 conditions permit.^ The "other sources" of revenue are 
 from pubUc works, Ucenses, fees, rents, etc. But in New 
 South Wales and in Queensland, besides the rates and en- 
 dowment, the only additional revenue comes from pubUc 
 works. 
 
 Turning to the consideration of the local revenue systems 
 of the particular states, we present in the following table 
 some important data bearing on the source and yield of the 
 local tax in Queensland. The elasticity of yield is very 
 significant. While the value of the property had in- 
 creased about 19.5 per cent, from 1903 to 1911, the revenue 
 had increased 92.3 per cent dming the same period. It 
 is interesting to note that the revenue of the shires had 
 increased more rapidly than that of the urban communi- 
 ties. In 1910, the prevailing general rate in the cities and 
 towns was Sd. which was the highest rate levied. The 
 lowest was li d. In the shires the general rate averaged 
 much less than 3d. in the pound, the maximum levied, 
 while the minimum rate was as low as ^d.^ The system of 
 "differential rating" whereby each minor civic division, 
 
 ^ In Victoria rating on the unimproved value was made optional in 
 1914. 
 
 * Cf. supra, chapter n, pp. 29, 55. Under the provisions of the Shires 
 Bill (Act No. 33, 1905) the endowment to the shires for the first three 
 years was on such a scale that no shire would need levy a higher rate than 
 Id. in the poxmd. Cf. Papers Relative to the Working of Taxation, etc. (Cd. 
 3761), 1907, p. 10. 
 
 Statistics of the State of Queensland (1910), pt. vi.
 
 LAND TAXES IN AUSTRALASIA 
 
 91 
 
 TABLE SHOWING THE RECEIPTS FROM RATES AND THE 
 VALUE OF RATABLE LAND IN QUEENSLAND FROM 
 1903 TO 1911 1 
 
 Yeax 
 
 1903 
 1904 
 1905 
 1906 
 1907 
 1908 
 1909 
 1910 
 1911 
 1912 
 
 Capital value 
 
 of unim- 
 proved land 
 
 44,149.974 
 43,651,241 
 42,358,173 
 43,178,545 
 43,817,870 
 45,025,085 
 47,314,811 
 49,797,830 
 52,788,079 
 64,991,920 
 
 Revenue from rales, general and 
 others 
 
 Cities and 
 towns 
 
 191,975 
 216,133 
 216,283 
 217,168 
 226,948 
 233,622 
 247,433 
 278,300 
 
 357,550 
 
 Shires 
 
 118,127 
 160,759 
 161,198 
 170.617 
 187,397 
 202,722 
 222,536 
 253,398 
 
 342,481 
 
 Total 
 
 340,102 
 376,892 
 377,481 
 387,785 
 414,345 
 436,344 
 469,969 
 631,698 
 654,125 
 700.031 
 
 e.g., a ward, or division of a shire, fixes its own rate of tax,^ 
 seems to solve a serious objection to the rating on unim- 
 proved value.' If the same rate were charged on town as 
 on rural land, as the value of land in the country is gener- 
 ally more than that of the improvements, it would impose 
 a greater hardship upon the rural community and would 
 violate the principle of "benefit," since the expenditure of 
 a town is generally greater than in the country. Alto- 
 gether, the expediency of a system which has remained 
 practically without change in legislation since its incep- 
 tion in 1890, which is in operation in all the local bodies, 
 which is practically the sole source of local revenue, which 
 is not oppressive, and which fulfills the criteria of elastic- 
 
 ^ Compiled from data in the Official Year Books of the Commxmwealth 
 of Australia (1901-07, p. 843, and 1901-11, p. 1017); Official Statistics, 
 Finance Bulletin 5 (1901-11), p. 28; Statistics of the State of Queensland, 
 1910, pt. VI ; A.B.C. of Queensland Statistics (1913). 
 
 * Cf. Statistics of the State of Queensland (1910), pt. VI. 
 
 Papers Relative to the Working of Taxation on tlie Unimproved Value 
 of Land in Queensland (Cd. 3890), 1908, p. 16.
 
 92 
 
 THE TAXATION OF LAND VALUE 
 
 ity, economy, and certainty, seems to be established for 
 the local governments of Queensland. 
 
 Compared with the Queensland system, rating on unim- 
 proved value in New South Wales is still in the experimen- 
 tal stage, not because there is any prospect of change to the 
 former system, but because the results are not yet conclu- 
 sive. Nevertheless, the general tendency is illustrated by 
 Sydney. Until 1908 rating was on annual value; in that 
 year rating on unimproved land value was made optional 
 with the city council. The question was made a party issue, 
 until on April 30, 1916, the Sydney city council voted in 
 favor of exempting all improvements from taxation.^ The 
 efficiency of the present system of local rating as compared 
 
 GENERAL RATES COLLECTED IN THE LOCAL BODIES 
 OF NEW SOUTH WALES ^ 
 
 Year 
 
 1907 
 1008 
 
 1909 
 1910 
 1911 
 1912 
 
 Shires 
 
 OS 
 
 287,635 
 382,336 
 
 374.540 
 421,596 
 463,501 
 517.025 
 
 ft. 
 
 53.7 
 60.9 
 
 52.5 
 53.0 
 52.3 
 51.7 
 
 Municipalities 
 (Sydney excepted) 
 
 5 
 
 544,339 
 558.811 
 
 573,600 
 
 642,630 
 
 720.419 
 
 r 
 
 77.4 
 79.3 
 
 77.5 
 
 78.8 
 
 78.2 
 
 Sydney * 
 
 202,272 ) 
 78,723 ) 
 
 206,461 ) 
 83,569 f 
 
 221,450 ) 
 98,183 ( 
 
 226,688 ) 
 
 100,267 ) 
 
 
 78.0 
 80.6 
 77.6 
 76.0 
 
 * In 1912 rating in Sydney was still mostly on the annual value. Only the required rate 
 of Id. (see supra, p. 55) was levied on the unimproved value. The upper figure in the 
 table represents the amount raised on annual value, the lower that on the unimproved 
 value. Official Year Book of New SotUh Wales (1913), pp. 617, 619. 
 
 ^ Land Values, July, 1916, p. 46. The Public, April, 28, 1911, p. 893. 
 2 Official Year Book of New South Wales (1909-13); Official Year Book 
 of the Commonwealth of Australia (1901-11), p. 980.
 
 LAND TAXES m AUSTRALASIA 03 
 
 with the former land tax for state purposes is shown in the 
 table above, where it will be observed that the receipts from 
 general rates in the shires alone have exceeded, since 1908, 
 the entire revenue accruing from the state land tax. Al- 
 though attributable in part to the elimination of the mini- 
 mum exemption of 240, the great increase in yield shows 
 the possibilities of the system and the advantages of the 
 local as compared with the state administration of the 
 tax. 
 
 It will be recalled that the receipts do not represent the 
 full amount collected from the rates on unimproved value, 
 for special, local and loan rates and, in the case of munici- 
 palities, the additional general rates may be levied on the 
 unimproved value at the option of the council subject to 
 a poll vote of the ratepayers. In connection with the in- 
 crease in the yield of the tax in all the local bodies it is 
 interesting to observe the increase in the value of the 
 ratable land as shown in the following data: ^ 
 
 UNIMPROVED VALUE OF RATABLE LAND IN NEW 
 SOUTH WALES 
 
 Year 
 
 Municipalities 
 
 Shires 
 
 1909 
 
 63,255,186 
 63,529.322 
 69.844,477 
 72,276,447 
 
 83,464,446 
 
 1910 
 
 89,936,000 
 
 1911 
 
 94,190,000 
 
 1912 
 
 97,461,000 
 
 
 
 As the yield of revenue in the shires has increased some- 
 what more rapidly than in the municipalities, so has the 
 value of the land. It will be noted that the yield in the 
 municipalities exceeds greatly that in the shires although 
 the value of the land in the latter communities exceeds that 
 in the former. The explanation is to be found in the fact 
 that the rate of tax in the municipalities is much higher 
 
 Official Year Book of New South Wales (1911), p. 723; (1913), p. 622.
 
 94 
 
 THE TAXATION OF LAND VALUE 
 
 than in the shires, the latter relying more upon the en- 
 dowment from the state government to supplement the 
 budgetary requirements. The endowments are fixed every 
 third year, the amount depending upon various criteria, as 
 the size of the shire, the revenue accruing from a Id. rate, 
 the necessary expenditure, the extent of roads and other 
 public works, ^ etc. The endowments fixed for the trien- 
 nium, 1910-12, were based on the general rates collected 
 in the shires in the preceding years. They are as follows: * 
 
 1st class 
 
 27 shires 
 
 No endowment 
 
 1st " 
 
 41 " 
 
 Up to 105. in the pound on General Rate 
 
 2d " 
 
 10 " 
 
 " " 155. " " " " 
 
 8d " 
 
 9 
 
 " " 205. " " 
 
 4th " 
 
 7 " 
 
 " " 255. " " " 
 
 6th " 
 
 14 " 
 
 " " 305. " 
 
 6th " 
 
 26 " 
 
 Not less than 405. in the pound on General 
 Rate 
 
 Compared with the government endowments to the 
 municipalities (1909) of 6953, the shires received 261,- 
 029 or 36.4 per cent of the total revenue. The rates of tax 
 levied in 1910 in the shires are shown below: 
 
 General rate in the pound 
 
 No. of shires 
 
 Unimproved value of land 
 
 id. 
 
 d. 
 
 d. 
 Id. 
 
 IK 
 lid. 
 i|5. 
 
 2<i. 
 
 1 
 2 
 4 
 
 76 
 
 2 
 23 
 20 
 
 7 
 
 1,472,826 
 1,691,054 
 4,626,443 
 
 54,027,624 
 696,157 
 
 13,109,370 
 
 10,322,122 
 3,990,316 
 
 
 1S4 
 
 89,935,912 
 
 Besides these general rates, local (special assessment) 
 rates were levied, the scale ranging from id. to 2rf. Of the 
 
 Official Year Book of New South Wales (1909-10), p. 601. 
 * Ibid. (1911), pp. 737-38.
 
 LAND TAXES IN AUSTRALASIA 05 
 
 nineteen cases of local rates in the shires only one was levied 
 on the improved value; the others were on the unimproved 
 value. 
 
 In New Zealand, of the total revenue from rates col- 
 lected by the local authorities, amounting, in 1907-08, to 
 1,356,257, thirty per cent was levied on unimproved 
 value. ^ In 1910 the proportion was thirty-three percent.* 
 In considering these percentages it must be remembered 
 that at least one-third of the local bodies now rate on 
 unimproved value.' 
 
 In this section the productiveness and elasticity of the 
 tax on unimproved value for local purposes have been 
 shown. The convenience and certainty of land taxes in 
 general are too well known to need discussion. In respect 
 to the taxes in the local governments of Queensland, New 
 South Wales, and New Zealand, the general satisfaction 
 with the system demonstrates the fiscal adequacy, con- 
 venience, certainty, and elasticity of the land tax. 
 
 10. To sum up the effects and working of the different 
 land taxes from the fiscal standpoint: 
 
 (1) There are three principal tax jurisdictions in Aus- 
 tralasia, and the same land is in some of the colonies sub- 
 ject to all three levies. There is, therefore, a duplication 
 of the administrative machinery involving an additional 
 cost of collection. 
 
 (2) The receipts of the tax levied for state and federal 
 purposes constitute a small percentage of the total reve- 
 nue. 
 
 (3) The land tax is well established in the fiscal system 
 of the state and local governments. By this is meant that 
 for the most part the tax is no longer a party measure.* 
 
 (4) The cost of administration and collection of the tax 
 constitutes a very small proportion of the revenue collected. 
 
 The New Zealand Official Year Book (1909), p. 198. 
 
 * Ibid. (1912), p. 313. 
 
 Supra, chapter n, 12. * See supra, 7.
 
 96 THE TAXATION OF LAND VALUE 
 
 (5) The tax for state and federal purposes is a design- 
 edly discriminatory charge, falling on a small class of 
 owners. 
 
 (6) The yield of these discriminatory taxes, state and 
 federal, fluctuates according (a) as the rate is a graduated 
 one, (6) as the rate of tax changes, (c) as the system is ef- 
 fective in its work of disintegration of the large holdings. 
 
 (7) The fiscal returns in the local bodies show the ade- 
 quacy and elasticity of the yield of the tax. 
 
 (8) The rates on unimproved value form the chief 
 source of local revenue in Queensland and New South Wales, 
 and constitute the sole tax in the localities of the former 
 state. ^ 
 
 (9) However adversely the value of land may be affected 
 upon the introduction of the tax, the value of the land tends 
 to rise in both the urban and rural commimities, often 
 making a higher rate of tax unnecessary to meet the grow- 
 ing budgets. 
 
 (10) The local system fulfills the fiscal requirements; 
 while the state and federal taxes aim to right a social ill. 
 Unhke the latter the local taxes are applicable to all land at 
 a uniform rate of tax. 
 
 11. Knowing the purpose of the progressive land 
 taxes of Australasia, the question of their fiscal importance 
 becomes subordinate to the inquiry: how has that purpose 
 succeeded? Has the tax caused the large landed estates 
 to be broken up? 
 
 After more than two decades since the introduction of 
 the tax on unimproved value, Australasia is still the coun- 
 try of large land holdings. Only in a few states has a re- 
 duction in the size or the number of large holdings occurred. 
 To illustrate: in New Zealand the average area held by 
 owners of 10,000 acres and upwards in 1889 was 30,009 
 
 * That is the sole tax for local purposes. The people of Queensland, of 
 course, contribute to the taxes levied by the state and central govern- 
 ments. Moreover.the "endowment" comes from other sources than the 
 land taxes.
 
 LAND TAXES IN AUSTRALASIA 
 
 vr 
 
 acres; in 1892 the average had been reduced to 29,924; 
 in 1902 to 28,312; in 1906 to 23,061 acres; and in 1910 to 
 20,523 acres. The number of holdings of 10,000 acres and 
 above has likewise considerably decreased, as appears from 
 the subjoined data: ^ 
 
 NUMBER OP FREEHOLDERS IN NEW ZEALAND OWNING 
 10,000 ACRES OR UPWARDS, 1883-1910 
 
 188S 
 
 1886 
 
 1889 
 
 1892 
 
 1902 
 
 1906 
 
 1910 
 
 247 
 
 259 
 
 250 
 
 262 
 
 216 
 
 204 
 
 171 
 
 The effect of the amended Acts of 1903 and 1907 is appar- 
 ent. The reduction since 1906 shows the process of dis- 
 integration. In Victoria similarly the number of such 
 holdings has fallen from 195, in 1906, to 175, in 1910, and 
 to 151 in 1913.^ In New South Wales, on the other hand, 
 there was a slight increase in the number of estates cover- 
 ing 10,000 or more acres, from 703 to 706 in a decade.' The 
 same has occurred in Western Australia, the large holdings 
 having increased from 74 to 110.* In addition, when it is 
 considered that the legislation in the interest of closer 
 settlement has been unremittent, and that the govern- 
 ments have exercised their power to repurchase land,* and 
 thus to aid in the work of disintegration, the effect attrib- 
 utable to the land tax could have been but insignificant. 
 
 The enactment of the tax, however, has often been ac- 
 companied by an increased number of land transfers 
 
 1 Pa'pers Bearing on Land Taxes, etc. (Cd. 4750), 1909, p. 75; New 
 Zealand Official Year Book (1914), pp. 567-68. 
 
 Offi/nal Year Book of the Commonwealth of Australia (1901-11), 
 p. 328; Victorian Year Book (1913-14), p. 713. 
 
 Official Year Book of the Commonwealth of Australia (1901-11), p. 327. 
 
 * Ibid., p. 328. 
 
 In this way the famous Cheviot estate in New Zealand was sub- 
 divided and sold.
 
 98 
 
 THE TAXATION OF LAND VALUE 
 
 through sales. Subdivision was said to have been common 
 in New Zealand prior to the Act of 1907.^ Similarly in 
 anticipation of the Commonwealth Act many sales of 
 large holdings took place. Between June and September, 
 1910, the law allowed the owner the right to deduct from the 
 taxable value the value of any estates about to be sold. In 
 that period 699 sales, aggregating 2,712,775 in value, 
 were reported to the tax commissioner; and the land thus 
 subject to sale was not included in the assessment of 
 the remaining land of these owners.^ Then, since the enact- 
 ment of the law, from October 1, 1910, to June 30, 1911, 
 the following sales and purchases of land transacted by 
 payers of the Commonwealth land tax, were reported at 
 the different land tax offices:' 
 
 
 Sales 
 
 Purchases 
 
 State 
 
 Number 
 
 Unimproved 
 value 
 
 Number 
 
 Unimproved 
 value 
 
 Central Office* and 
 Victoria 
 
 7,032 
 7.134 
 1,109 
 2,059 
 656 
 298 
 
 7,684,221 
 
 6,931,090 
 
 1,027,206 
 
 1,798,545 
 
 391,555 
 
 355,676 
 
 1,601 
 1,151 
 166 
 744 
 107 
 105 
 
 3,798,275 
 
 New South Wales 
 
 Queensland 
 
 3,496,073 
 611,328 
 
 South Australia 
 
 1,135,069 
 
 Western Australia 
 
 Tasmania 
 
 121,022 
 203,839 
 
 
 
 Total 
 
 18,288 
 
 18,188.293 
 
 3,874 
 
 9,266,506 
 
 
 
 * The Central Office deals with estates that iaclude property in more than one state. 
 
 It would seem, indeed, that at the same time that sub- 
 division was taking place there was likewise an acquisition 
 
 The Australasian, October 5, 1907, p. 888. 
 
 * First Annual Report of the Commissioner of Land Tax of the Common- 
 wealth of Australia (1912), p. 24. 
 
 * Official Statistics, Commonwealth of Australia, Monthly Summary, 
 Bulletin No. 14 (February, 1913), p. 35.
 
 LAND TAXES IN AUSTRALASIA 99 
 
 of new estates of taxable value. But it is reported that "as 
 a rule those who have relieved themselves of the tax are 
 taxpayers subject to the highest scales, but the buyers 
 of land, as a rule, are those subject to lower rates or 
 are wholly exempt from the tax." * Altogether, however, 
 allowing for the deterrent effect of the tax on the concen- 
 tration of large tracts of land in the hands of compara- 
 tively few owners, the actual disintegration of large estates, 
 except in New Zealand, has been slight. 
 
 12. The reasons for the inadequacy of the land tax 
 as a means of breaking up the large estates are traceable 
 to certain provisions in the legislation. The recognition 
 of this by the state governments is shown through the re- 
 visions which the Acts, especially in New Zealand, have 
 undergone. These amendments will be discussed under 
 the following heads: (1) evasions; (2) rates of tax; (3) val- 
 uation systems. 
 
 (1) The excessive exemptions and the progressive scales 
 have induced evasions to a greater extent than is usual 
 with taxes on real property. Among some common meth- 
 ods practiced to escape the burden were bogus partnerships, 
 one-man companies, false sales and leases, nominal gifts, 
 etc.^ To form a fictitious partnership was an expedient, 
 perfectly legal and successful, for before the amended pro- 
 visions of 1907, partners were assessed separately. Or it 
 was a simple matter, an expedient very prevalent in New 
 Zealand, to divide the estate nominally among the mem- 
 bers of the immediate family to avoid paying the highest 
 rate of tax. Not only did the Dominion of New Zealand 
 incur great losses through such evasions, but the gradu- 
 ated scale weighed less heavily on the large owners. Con- 
 sequently, in 1907, the following clauses were inserted in 
 the New Zealand Act to put a stop to the practices men- 
 
 * First Annual Report of the Commissioner of Land Tax of the Com- 
 monwealth of Australia (1912), p. 24. 
 
 Papers Bearing on Iiand Taxes, etc. (Cd. 4750), 1909, p. 75.
 
 100 THE TAXATION OF LAND VALUE 
 
 tioned above. ^ Similar provisions have been incorporated 
 in the laws of the other states:* 
 
 1. Life tenants are liable as if owners of fee-simple. 
 
 2. Lessees are Uable as if owners (except lessees of 
 the Crown, Native, or exempt land . . .). 
 
 S, Shareholders are liable as if owners of the company's 
 land in proportion to their interest in the paid-up 
 capital. 
 
 4. Two companies having practically ^ the same share- 
 holders are deemed one. 
 
 5. Joint owners are assessed jointly as if the whole land 
 was owned by a single person, and, in addition, the 
 joint owners are liable for their interests in the joint 
 estate taken in conjunction with any lands owned by 
 them in severalty. . . . 
 
 6. Persons occupying land jointly are liable as if own- 
 ing jointly, as if the whole land was owned by a 
 single person. . . . 
 
 7. The buyer in possession is liable, although convey- 
 ance has not been executed. 
 
 8. The seller remains liable until 15 per cent of the pur- 
 chase money is paid or the settlement has been agreed 
 upon, except in case of agreement of sale made five 
 years before the passing of the Act, or made by a 
 seller not the owner of more than 40,000 unim- 
 proved value. 
 
 * "It is generally admitted that the bill is a clever piece of draughts- 
 manship, elaborately contrived to prevent the nominal conveyances, 
 mortgages, trusts and other devices by which payment of the graduated 
 tax has been evaded in the past." The Australasian, October 19, 1907, 
 p. 1019. 
 
 Cf. Victoria, 1 Geo. V, No. 2284, 38-52; Tasmania, 2 Geo. V, No. 
 47, 19. 
 
 New Zealand, 7 Edw. VII, No. 18, 11-21. The Victorian statute 
 provides that two companies shall be deemed one " if not less than three- 
 fourths of the paid-up capital of each is held by or on behalf of the 
 shareholders in the other." 1 Geo. V, No. 2284, 41 (2).
 
 LAND TAXES IN AUSTRALASIA 101 
 
 9. No disposition is to be effective so long as possession 
 is retained. 
 
 10. Tax payable by buyer may be deducted from the 
 amount payable by seller. . . . 
 
 11. Equitable owners are liable as if legal owners. 
 
 12. Trustees are liable as if beneiScially entitled to the 
 land. 
 
 13. Mortgagees in possession of the land are liable as if 
 lessees. 
 
 (2) A second cause of the failure of the tax to accomplish 
 its purpose is the rate of tax, which, speaking generally, is 
 too low to be effective. The ordinary tax on unimproved 
 value for state purposes ranges from ^d. in the pound in 
 Victoria and South Australia to Id. (.41 per cent) in New 
 Zealand, Western Australia, and Tasmania. Then, it will 
 be recalled that in Victoria and Western Australia the ordi- 
 nary tax is the only one charged, that is, there exists no 
 progressive tax in those states; that in South AustraUa, the 
 additional tax on estates of over 5000 is only ^d. in the 
 pound, a uniform rate; and that in Western AustraUa one- 
 half of the slight charge of Id. is remitted to the owner 
 of improved property. The graduated scale of rates in 
 Tasmania on land exceeding 2500 ranges from Ijd. to 
 9,^d. (about one per cent). Such rates surely are not exces- 
 sive, and thus far the income of the landowner has not 
 been touched sufficiently to make the holding of his es- 
 tates unprofitable. 
 
 In New Zealand, however, when the ineffectiveness of 
 the tax was realized, the graduated scale was revised from 
 time to time to tighten the screw, until, in 1907, a super- 
 charge of twenty-five per cent of the new graduated scale 
 was added on all estates of 40,000 or above, the rates 
 ranging from ^d. in the pound on land 5000 to two per 
 cent on estates of 200,000 or above; since 1910, when the 
 additional tax of twenty-five per cent came into force, the
 
 102 
 
 THE TAXATION OF LAND VALUE 
 
 graduated scale has ranged from -^d. on land 5000 to 
 about two and a half per cent on the largest estates. The 
 estimated increase is concretely shown in the following 
 table: 
 
 COMPARISON OF PAYMENT UNDER PRESENT AND 
 FORMER SCALES OF GRADUATED LAND TAX 
 
 On unimproved value 
 
 At rate in 
 
 At rate in 
 
 At rate in 
 
 At rate in 
 
 (not business premises) 
 
 1903-06 
 
 1907 
 
 1910 
 
 1912 
 
 5,000 
 
 1.3 
 
 1.3 
 
 1.3 
 
 .65 
 
 40,000 
 
 145. 
 
 160. 
 
 200. 
 
 211. 
 
 75,000 
 
 410. 
 
 562. 
 
 702. 
 
 807. 
 
 100.000 
 
 677. 
 
 1000. 
 
 1250. 
 
 1467. 
 
 130,000 
 
 1083. 
 
 1690. 
 
 2112. 
 
 2517. 
 
 150,000 
 
 1407. 
 
 2250. 
 
 2813. 
 
 3374, 
 
 210,000 
 
 2625. 
 
 4200. 
 
 6250. 
 
 6380. 
 
 Add to this graduated tax the ordinary rate of Id. in the 
 pound, and, if the owner is an absentee, fifty per cent 
 of the graduated tax besides, and the burden becomes 
 considerable. 2 Disintegration under these circumstances 
 seems inevitable. " Even now analysts are found who are 
 at pains to prove that the landowners will be able to pay 
 the tax of 1910 and hold out against it as stubbornly as 
 they defied its predecessors. In two years, however, the 
 land tax has increased nearly 160,000, and . . . the in- 
 ducements to break up the greater properties will, after next 
 year, be very strong indeed." ^ 
 
 In the Commonwealth of Australia, the federal tax added 
 to the state land taxes makes the burden in some cases 
 heavier even than in New Zealand. The expectations with 
 
 * Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, p. 77. 
 
 * "I know one owner absent for his health, who will be called upon to 
 pay 7000 for the year. ... Of course this is confiscation pure and 
 simple, and it will compel the owner to sell." The Australasian, August 
 24, 1907, p. 502. 
 
 * Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, p. 77.
 
 LAND TAXES IN AUSTRALASIA lOS 
 
 regard to subdivision, therefore, apply equally to Aus- 
 tralia as to New Zealand. 
 
 (3) Defective valuation systems have helped to frustrate 
 the purpose of the land tax. Enough has been said con- 
 cerning the systems of valuation based on self -assessment 
 and assessments made infrequently and in personam. The 
 crude scheme of valuation according to the grazing capa- 
 city of the land, which existed until 1910 in Victoria, could 
 not be made effective in the work of disintegration. Indeed, 
 it was estimated that the nominal valuation of land in that 
 colony (1902) at 9,949,429 was so much below the actual 
 value that about 100,000,000 value of private estates 
 escaped taxation.^ With the amended laws to prevent 
 evasion, with the additional rates and duplicated taxes, 
 with more efficient systems of land appraisal, some changes 
 in the social efltects of the land tax may be looked for in 
 Australasia. 
 
 IS. But with all these defects in legislation the pur- 
 pose of the land taxers was not wholly frustrated. To some 
 extent they succeeded in shifting the burden upon an 
 unpopular class. Not to mention the popularity of the 
 land tax with the urban landless population, the tax was 
 acceptable and favored by certain classes of landowners 
 even. This is to be explained by another feature of the 
 legislation, namely, the liberal exemptions; for only a small 
 percentage of the proprietors pay any land tax at aU for 
 state purposes. In New Zealand, for example, only 30,855 
 owners, out of a total number of 143,243 (including 
 Crown tenants), in 1909, were subject to land tax.'' The 
 exemptions are equally liberal in the other colonies. 
 Thus only 41,000 out of a number of 170,000 landed 
 proprietors in New South Wales in 1902 paid any land 
 
 * Coghlan, Statistical Account of Australia and New Zealand (1903-04), 
 p. 674. 
 
 * It was estimated by one authority that about six-sevenths of those 
 holding land in New Zealand escape the state land tax. Cf. Papers 
 Bearing on Land Taxes, etc. (Cd. 4750), 1909, p. 70.
 
 104 THE TAXATION OF LAND VALUE 
 
 tax; * while in Victoria all city landholders as well as all 
 rural estates less than 640 acres were until 1910 released 
 from the tax. As has been already pointed out, only 
 13,387 land owners in all the six states were, in 1910-11, 
 liable for the Commonwealth tax. 
 
 Besides the minimum exemption of land value ranging 
 from 50 in Western Australia to 5000 under the Com- 
 monwealth Act, there are special exemptions allowed at the 
 discretion of the Commissioner; as, for example, the petty 
 owner in New Zealand, whose income does not exceed 
 200,2 etc., in which case the amount of exemption may 
 reach as much as 3500; or the exemption of all improved 
 agricultural land to the amount of 250 in Western Aus- 
 tralia; or the exemption in Victoria of the tax when, in 
 cases of loss by fire, storm or other accident, the charge 
 would create a hardship upon the owner. 
 
 The following exemptions from the Victorian statute, 
 though more inclusive than those in the other states, 
 further limit the application of the progressive land tax: ' 
 
 1. Land, the property of His Majesty which is unoccu- 
 pied or used for public purposes. 
 
 2. Land used exclusively for . . . commons, mines, 
 public worship, mechanics* institutes, art galleries, 
 public libraries, cemeteries, agricultural show grounds, 
 public gardens, primary free schools, charitable pur- 
 poses, the purposes of any club for cricket, football, 
 golf, etc., public technical and working men's schools 
 and colleges, the University of Melbourne. 
 
 S. Land vested in or held in trust ... for: any munici- 
 pality or council thereof; any waterworks; trust local 
 governing body; any church or religious denomination. 
 
 4. Land vested in: The Victorian Railways Company; 
 the Minister of Public Instruction; the Board of 
 
 * Coghlan, op. eit., p. 672. * Cf. supra, p. 37. 
 
 Victoria, 1 Geo. V, No. 2284, 9.
 
 LAND TAXES IN AUSTRALASIA 105 
 
 Land and Works; the Commissioner of the Mel- 
 bourne Harbor Trust, etc.; the Commissioner of 
 Savings Banks . . . ; trustees for any Friendly Society 
 or Trade Union or Trade Union Institution; any 
 public corporation ... if exempted from land tax by 
 the Governor in Council. 
 
 Thus the taxpayers of the state and federal land taxes 
 are comparatively few in number, and constitute a group, 
 it is popularly believed, that can best bear the burden. 
 
 14. However, to say that even the progressive land 
 tax had for its purposes merely to disintegrate the large 
 land holdings and to shift the burden of taxation on the 
 recipients of the unearned increment would be erroneous. 
 Indeed, other social and economic influences were expected 
 to result from the levy of the state and federal taxes, as 
 well as from the levy of the local land tax. Owing partly 
 to the identification of the land tax with the Single Tax, 
 great stress was laid upon these effects. Would it destroy 
 the market value of land and finally put an end to private 
 ownership of land? Would it prove the panacea for all 
 social ills, even to the eradication of poverty.? The appre- 
 hension that the existing social order would be more or 
 less subverted was general. That is why, when the tax was 
 first proposed, its opponents regarded it as a confiscatory, 
 revolutionary, socialistic measure; that is why, they said 
 of the amended Acts that they were "giving an extra 
 turn to the screw." ^ That is why, also, rating on unim- 
 proved value was termed "experimental legislation," and 
 great uncertainty was felt as to the weighty consequences 
 of the system.^ We may, therefore, inquire, how these 
 various expectations have materialized. 
 
 New Zealand, Pari. Debates (1893), vol. ucscxn, pp. 240. 375-77. 
 Cf. also The Australasian, April 3, August 21, 1875; February 17, 1877; 
 December 4, 1880, et 'passim. 
 
 * " It is now becoming the law that the system trf taxation should be 
 upon the unimproved value, but I have no doubt but experience will en-
 
 106 THE TAXATION OF LAND VALUE 
 
 The experience with the tax for over two decades has 
 both allayed the anxiety of its adversaries and dissipated 
 the extravagant hopes of its most ardent adherents. Never- 
 theless, some influences, social and economic, have been 
 traced to the land tax. Following the questionnaire of the 
 British Government ^ with reference to the working of the 
 land tax, we shall consider its effect on: (1) the building 
 trade; (2) land speculation; (3) the incidence on house 
 property and vacant sites, and (4) rent. 
 
 For two reasons great caution must be exercised in 
 weighing the evidence pro and con in respect to the effects 
 of the tax. The first is, that the rate of tax has hitherto 
 been too slight a burden to occasion great changes; the 
 second is, that the influences tending toward the develop- 
 ment of the Australasian colonies, aside from all the reform 
 measures including the land tax, have been numerous. 
 For example, to attribute the prosperity, the general steady 
 rise in the value of land, the increase in building operations, 
 etc., to the land tax or to any other particular social legis- 
 lation would be erroneous, for the great development of the 
 country, as is well known, is largely the result of specially 
 favorable circumstances which enable it to compete in the 
 world market, of certain climatic and economic advan- 
 tages which attract more settlers to its soil, and of other 
 causes operating in every newly settled country. 
 
 15. These facts with reference to the development of 
 the colonies must be borne in mind especially in examining 
 
 lighten us very quickly as to its effects. Whether those who advocate 
 this system are right in saying that its effects will be the gradual extinc- 
 tion of capital value of freehold land, ... we shall see and before many 
 years are over many of us will have learnt a new lesson in political econ- 
 omy." Papers Relative to the Worhing of Taxation on Unimproved Value 
 of Land in Queensland (Cd. 3890), 1908, p. 10. 
 
 ^ In its important and thoroughgoing investigation concerning the 
 taxation of land value the British Government, in 1906, sent requests to 
 various countries for information. The replies of the oflBcials in Austral- 
 asia are not all of the same tenor. There is, nevertheless, an agreement 
 concerning the effects which is noteworthy. We propose, for the most 
 part, to summarize their evidence in the following sections.
 
 LAND TAXES IN AUSTRALASIA 107 
 
 the effect of the land tax on building operations. The 
 stimulus given to the use of capital employed in the build- 
 ing trade is more or less emphasized by the officials of the 
 respective colonies. The expenditure on improvements in 
 New Zealand since 1893 was said to have been so great 
 "that the supply of labor and materials could scarcely 
 keep pace with the demand." ^ This effect is generally 
 and logically attributed to the exemption of improvements 
 from taxation; nevertheless, it must not be forgotten that 
 it is only since the nineties that New Zealand has recovered 
 from a long period of depression and that general conditions 
 liave been especially prosperous. One official, indeed, 
 traces the earlier relief from the depression of 1893, in 
 Queensland, to the exemption of improvements, which 
 greatly encouraged building operations.^ In New South 
 Wales, the suburban development that has taken place 
 has been attributed partly to the tax, partly to the im- 
 proved transportation facilities.' So also in South Aus- 
 tralia the effect of the tax is said to have been beneficial to 
 the building trade and to the development of the suburbs.* 
 
 * Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, pp. 134-35; 
 also (Cd. 3191), 1906, p. 25. "The effect on urban and suburban land 
 has been very marked. An owner of land occupied by buildings of little 
 value finding that he has to pay the same rates and taxes as an owner 
 having his land occupied by a valuable block of buildings must see that 
 his interests lay in putting his land to its best use. The rebuilding of this 
 city (Wellington) which for some years past has been rapidly going on 
 is largely attributable to the taxation and rating on land values, so that 
 the supply of building materials could not at times keep pace with the 
 demand." Ibid. (Cd. 4750), pp. 136-37. 
 
 * Papers Relative to the Working of Taxation on Unimproved Value of 
 Land in Queensland (Cd. 8890), 1908, pp. 4, 17. 
 
 Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, p. 133. 
 
 * Ihid., p. 116. The following quotation from the report of the Com- 
 missioner of Taxes in New Zealand, is significant because his conclusions 
 are based on replies from fifty-two local authorities relative to the eflfects 
 of the tax: "The effect has certainly been to greatly stimulate the building 
 trade. The object and tendency of this system of taxation is to compel 
 land being put to its best use, so that the greatest amount of income 
 may be derived from it, and rendering it unprofitable to hold land for
 
 108 
 
 THE TAXATION OF LAND VALUE 
 
 Although the statistics of the housing conditions in Aus- 
 tralia bear out the testimony of the officials with regard 
 to the increase in building operations, they tell us Uttle 
 about the influence of the land tax on such operations. From 
 the subjoined table the number of dwellings is seen to have 
 increased more rapidly than the population in each of the 
 colonies except Western Australia. From the standpoint 
 of congestion, the housing conditions not only are good, 
 but they have tended to improve from decade to decade. 
 
 TABLE SHOWING THE INCREASE OF INHABITED DWELL- 
 INGS IN THE AUSTRALASIAN COLONIES FROM 1901 
 TO 1911* 
 
 Colony 
 
 New South Wales 
 
 Victoria 
 
 Queensland 
 
 South Australia . . 
 Western Australia 
 
 Tasmania 
 
 New Zealand . . 
 
 1901 
 
 Number 
 
 cf ill' 
 
 habited 
 
 dxDell- 
 
 ings 
 
 252,502 
 241,410 
 98,737 
 60,856 
 48,606 
 34,165 
 158,898 
 
 Propor- 
 tion to 
 100 of 
 
 popular 
 Hon 
 
 18.3 
 19.9 
 19.4 
 19.4 
 25.0 
 19.5 
 20.1 
 
 1911 
 
 Number 
 of in- 
 habited 
 dtcellr 
 ings 
 
 332,841 
 
 273,495 
 
 126,834 
 
 84,437 
 
 70,319 
 
 40,111 
 
 215,425 
 
 Propor- 
 tion to 
 100 of 
 popula- 
 tion 
 
 19.6 
 20.4 
 20.3 
 20.1 
 23.9 
 20.7 
 21.0 
 
 Per cent cf 
 increase 
 1901-11 
 
 Dwell- 
 ings 
 
 31.8 
 13.2 
 28.4 
 20.8 
 44.9 
 17.4 
 35.5 
 
 Popu- 
 lation 
 
 23.3 
 10.6 
 22.7 
 16.0 
 51.9 
 10.4 
 30.1 
 
 In New Zealand, for example, the average number of 
 persons to an inhabited dwelling had decreased from 5.17 
 
 prospective increment in value. It has been the direct cause of much 
 valuable suburban land being cut up and placed on the market and thus 
 rendered more easily available for residential purposes, and of the sub- 
 divbion of large estates in the country, resulting in closer settlement " 
 (p. 136). 
 
 ^ Compiled from data in Census Bulletin No. 17, Commonwealth of 
 Australia (1911), and in Coghlan, A Statistical Account of Australia and 
 New Zealand (1903-04), p. 853.
 
 LAND TAXES IN AUSTRALASIA 109 
 
 in 1886 to 4,82 in 1906 and to 4.66 in 1911. Moreover, 
 the percentage of the population in houses constructed of 
 better materials had increased from 95.83 per cent in 1891 
 to 97.64 per cent in 1911; while the improved accommo- 
 dations were mainly in the five to six room houses, which 
 constituted the largest class of dwellings. There were 
 89,275 houses of five to six rooms in 1911, an increase of 
 20,885 in five years. ^ As to Australia, dwellings with five 
 and six rooms predominated also in New South Wales, 
 Victoria, and Queensland, in 1911; those with three and 
 four rooms constituting the largest group in South Aus- 
 tralia, Western Australia, and Tasmania. Wooden houses 
 continue to predominate in all the colonies excepting 
 South Australia, where, in 1911, stone buildings were 
 about sixty-two per cent of all the dwellings. At the same 
 time the number of brick houses had increased consider- 
 ably, the increase being least in Queensland and South 
 Australia.^ 
 
 But are these favorable housing conditions attributable 
 at all to the tax on unimproved value? Since some form 
 of the tax is levied in each of the colonies, it is difficult 
 to draw positive conclusions from a comparison of condi- 
 tions in the several states. Nevertheless, such a compari- 
 son is suggestive, if not conclusive. Bearing in mind that 
 of the four largest cities in New Zealand, Wellington and 
 Christchurch rate on the unimproved value, and Auckland 
 and Dunedin on the annual value, the changes in housing 
 in these cities set forth in the accompanying table on 
 page 110 deserve consideration. 
 
 It is noteworthy that Christchurch, in spite of its very 
 rapid growth of population, has the least congestion, and 
 that the average number of persons per dwelling has tended 
 to decrease in Wellington more than in Dunedin; while 
 
 * Report on Results of the Census of New Zealand (1911), p. 24. 
 
 * Census Bulletin No. 17, CommonweaUh of Australia (1911), p. 7; 
 Coghlan, op. cU.. 1903-04, p. 853.
 
 110 
 
 THE TAXATION OF LAND VALUE 
 
 TABLE SHOWING THE AVERAGE NUMBER OF PERSONS 
 TO EACH INHABITED DWELLING IN THE FOUR 
 PRINCIPAL CITIES OF NEW ZEALAND, 1891-191 ! 
 
 Borough 
 
 Population 
 1911 
 
 Per cent of 
 increase 
 in popu- 
 lation 
 1891-1911 
 
 Average number of 
 persons to dwelling 
 
 
 1891 
 
 1901 
 
 1911 
 
 Auckland 
 
 40,536 
 64,372 
 53,116 
 41,529 
 
 41.6 
 107.5 
 227.4 
 
 85.6 
 
 5.09 
 5.50 
 5.41 
 5.11 
 
 5.17 
 5.51 
 5.09 
 5.06 
 
 5.47 
 
 Wellington 
 
 Christchurch 
 
 Dunedin 
 
 4.96 
 4.60 
 4.71 
 
 
 
 Auckland shows an increase in congestion rather than a 
 decrease as in the other cities. 
 
 The optional rating system in New Zealand permits of 
 further comparison. If the exemption of improvements from 
 taxation encourages building and improvement, then it 
 would seem that for towns of approximately the same popu- 
 lation, the value of improvements would tend to be greater 
 in the towns that rate on the unimproved value. Never- 
 theless, both because of the influence of other factors,^ and 
 because of the comparatively few cases presented in the 
 subjoined tables, the effect of the rating system on build- 
 ing operations is not apparent from the table. The value 
 of improvements exceeded the value of the land in fif- 
 teen (sixty-eight per cent) out of the twenty-two boroughs 
 represented as rating on unimproved value, and in only 
 nine (forty-three per cent) out of the twenty-one boroughs 
 rating on capital or annual value. When, however, we 
 find equally large increments of value in improvements in 
 boroughs that do not rate on unimproved value as in those 
 
 * Report on Results of the Census of New Zealand (1911), p. 25. 
 
 * Everything that affects the site value, e.g., the general conditions of 
 business, or the land tax even, will change the ratio of building to land 
 Value. For that reason the data presented for comparison are inade- 
 quate, but are the best available.
 
 LAND TAXES IN AUSTRALASIA 
 
 111 
 
 I. TABLE SHOWING THE RELATIVE VALUE OF LAND 
 AND IMPROVEMENTS IN CERTAIN BOROUGHS RATING 
 ON UNIMPROVED VALUE IN 1913 
 
 Borough 
 
 Devenport 
 
 Grey Lynn 
 
 Gisborne 
 
 Dannevirke .... 
 Palmerston North. 
 
 Masterton 
 
 Lower Hutt 
 
 Petone 
 
 Onslow 
 
 Wellington 
 
 Karori 
 
 Miramar 
 
 Greymouth 
 
 Christchurch . . . 
 
 Woolston 
 
 Spreydon 
 
 New Brighton . . 
 
 Sumner 
 
 West Harbour . . 
 
 Maori Hill 
 
 Invercargill .... 
 Campbelltown . . 
 
 7,501 
 8,491 
 9,817 
 3,527 
 
 11,709 
 6,585 
 4,440 
 7,010 
 1,969 
 
 66,338 
 1,534 
 1.739 
 5,560 
 
 55.098 
 3,699 
 3,560 
 1,990 
 1.987 
 2,119 
 2,278 
 
 13,590 
 1,865 
 
 I 
 
 11 
 1^ 
 
 654,513 
 511,038 
 
 1,428,720 
 381,859 
 
 1,653,845 
 572,750 
 862,406 
 688.609 
 270.022 
 11,438,441 
 318,645 
 514,648 
 270,534 
 
 6,145,614 
 172,641 
 235,360 
 167,585 
 272,690 
 74,788 
 184.000 
 
 1,274,361 
 98,570 
 
 874.318 
 711,385 
 
 1,133,327 
 387,517 
 
 1,272,403 
 680,620 
 569,537 
 701,581 
 271,981 
 10,114,152 
 , 196,720 
 303,321 
 557,722 
 
 7,145,802 
 303,938 
 342,070 
 186,569 
 255,987 
 129,517 
 244,642 
 
 1,793,723 
 181,887 
 
 'S'5 
 
 57.2 
 58.2 
 44.3 
 50.4 
 43.5 
 54.3 
 39.8 
 50.4 
 50.1 
 46.9 
 38.1 
 37.0 
 67.3 
 63.8 
 63.7 
 59.2 
 52.6 
 48.4 
 63.3 
 57.0 
 68.4 
 64.8 
 
 84 
 
 151 
 
 102 
 
 170 
 
 49 
 
 30 
 
 42 
 
 40 
 
 79 
 
 64 
 
 that do (see last column of tables I and II), the efficacy 
 of the land tax in stimulating building cannot be judged 
 from the foregoing data. 
 
 With regard to the alleged tendency of the tax to en- 
 courage overbuilding, the following data of the number 
 of vacant dwellings (see table on page 113), though 
 equally inconclusive as the foregoing, are nevertheless of 
 interest. 
 
 Considering that some of the early dwellings must have 
 
 * Statistics of the Dominion of New Zealand (1913), vol. iv.
 
 112 
 
 THE TAXATION OF LAND VALUE 
 
 n. TABLE SHOWING THE RELATIVE VALUE OF LAND 
 AND IMPROVEMENTS IN CERTAIN BOROUGHS RATING 
 ON CAPITAL OR ANNUAL VALUE IN 1913 1 
 
 Borough 
 
 Whangarei * 
 
 Birkenhead * 
 
 Northcote 
 
 New Market .... 
 Mount Eden .... 
 Mount Albert . . . 
 
 Auckland 
 
 Onehunga 
 
 Waihi 
 
 New Plymouth . . 
 
 Napier 
 
 Wauganui 
 
 Nelson 
 
 Ly ttelton 
 
 Timaru 
 
 Oamani 
 
 Dunedin 
 
 Momington 
 
 St. Kilda* 
 
 Green Island .... 
 Invercargill South 
 
 2,790 
 2,073 
 1,537 
 3,127 
 
 10,078 
 7,878 
 
 47,783 
 4,872 
 6,740 
 7,576 
 
 10,910 
 
 13,380 
 8,465 
 4,151 
 
 12,048 
 5,405 
 
 48,988 
 4,917 
 4,486 
 1,991 
 1,549 
 
 II 
 
 344,221 
 
 319,415 
 
 183,008 
 
 370,569 
 
 752,359 
 
 791,660 
 
 11,429,684 
 
 514,137 
 
 150,063 
 
 1,332,112 
 
 1,496,121 
 
 1,686,113 
 
 845,223 
 
 265,510 
 
 1,120,531 
 
 290,531 
 
 4,209,061 
 
 190,541 
 
 305,045 
 
 60,925 
 
 136,394 
 
 287,758 
 266,605 
 143,155 
 295,560 
 
 1,169,372 
 734,600 
 
 6,987,325 
 497,128 
 273,535 
 872,703 
 
 1,366,489 
 
 1,106,359 
 899,720 
 693,447 
 
 1,117,759 
 542,802 
 
 6,227,536 
 404,368 
 544,585 
 173,751 
 122,706 
 
 "S^-S 
 
 "S s.-s 
 
 
 45.6 
 45.5 
 43.8 
 44.3 
 60.8 
 48.1 
 37.9 
 49.1 
 64.5 
 39.5 
 47.7 
 48.9 
 51.5 
 72.3 
 49.8 
 65.1 
 59.6 
 67.9 
 64.0 
 74.0 
 47.3 
 
 ?l 1 
 
 129 
 188 
 
 80 
 118 
 
 78 
 
 119 
 
 84 
 
 63 
 
 123 
 
 48 
 
 * Adopted rating on unimproved value in 1013. 
 
 been abandoned by the owners as unfit for habitation, the 
 figures do not indicate much overbuilding. New Zealand 
 had the largest proportion of vacant houses, Queensland 
 the least. When it is considered that urban property in 
 1901 largely escaped the state land taxes, and that the 
 system of rating on unimproved value was most prevalent 
 in Queensland, the very low percentage (one and six-tenths 
 per cent) of vacant houses in the latter colony is note- 
 
 * Statistics of the Dominion qf New Zealand (1913), vol. rv.
 
 LAND TAXES IN AUSTRALASIA 
 
 118 
 
 TABLE SHOWING PERCENTAGE OF VACANT HOUSES AND 
 HOUSES IN CONSTRUCTIOxN TO THE TOTAL NUMBER 
 OF DWELLINGS. 1901 ^ 
 
 Class of 
 dwelling 
 
 Uninhab- 
 ited 
 
 In construc- 
 tion 
 
 o 5 
 
 5.5 
 .53 
 
 ^.S 
 5*^ 
 
 4.5 
 
 .24 
 
 IB 
 I- 
 
 1.6 
 
 
 7.4 
 .47 
 
 I 
 
 4.4 
 .39 
 
 
 6.3 
 
 .50 
 
 ^1 
 
 6.3 
 .50 
 
 worthy. The following figures of the proportion of vacant 
 houses in the four principal cities of New Zealand again 
 fail to furnish any conclusive evidence of the effect of the 
 tax on building. In 1901, when all the above-named cities ^ 
 rated on the annual value, the proportion of the unin- 
 habited dwellings to all the dwellings in three of the four 
 cities was less than a decade later. Wellington and Christ- 
 church show a considerable increase in the number of va- 
 cant houses, but so does Dunedin, where rating is still 
 on the annual value. 
 
 In this connection it has been urged against the system 
 of taxing land value, that the exemption of buildings from 
 taxation will induce the owners to utilize all the available 
 space to the detriment of sanitary dwellings; also that all 
 open spaces, recreation centers, would be built upon to 
 the detriment of the pubhc welfare. A New Zealand cor- 
 respondent claims that this overbuilding tendency has 
 actually occurred in Christchurch where rating on unim- 
 proved value is in operation.' The evidence on this point 
 
 Coghlan, op. cit., 1903-04, p. 853. 
 
 * Wellington adopted rating on land value in 1901, Christchurch in 
 1902. 
 
 * "It is causing open spaces in the towns to be cut up and built upon;
 
 114 
 
 THE TAXATION OF LAND VALUE 
 
 TABLE SHOWING PERCENTAGE OF THE UNINHABITED 
 TO THE TOTAL NUMBER OF BUILDINGS IN THE 
 PRINCIPAL CITIES OF NEW ZEALAND, 1901 AND 1911 
 
 
 1901 
 
 1911 
 
 Number 
 
 City 
 
 Number 
 
 of vacant 
 
 houses 
 
 Percentage 
 of total 
 
 Number 
 
 of vacant 
 
 houses 
 
 Percentage 
 of total 
 
 of houses 
 in build- 
 ing, 1911 
 
 Auckland .... 
 Wellington . . . 
 Christdiurch . 
 Dunedin 
 
 237 
 266 
 134 
 105 
 
 3.4 
 3.2 
 8.7 
 2.0 
 
 220 
 941 
 661 
 
 488 
 
 2.9 
 7.2 
 5.7 
 5.5 
 
 29 
 77 
 99 
 48 
 
 is, however, insufficient. But from the housing conditions 
 in Australasia, as described above, it is clear that the one 
 family house continues to prevail generally and that the 
 evils of congestion are not imminent there. 
 
 Returning to the evidence of the Australasian officials, 
 we find it claimed by many of them that the land tax 
 has had a deterrent effect on speculation in land, that to 
 some extent it has caused the "fictitious" value of land 
 to decline. Upon the introduction of the tax the tendency 
 has perhaps been for land to fall in value; ^ but with the 
 
 and there is every inducement, of course, for the owner to crowd as many 
 houses as possible on a section for letting purposes; seeing that he pays 
 the same rates whether he has one house or ten on an acre of ground. It 
 has been most injurious from this point of view in the cathedral city of 
 Christchurch, long the admiration of visitors as the 'Garden City' of 
 New Zealand. Land is fairly cheap there, and almost in the center of the 
 town were large and beautiful gardens. . . . These were additional 
 'lungs* for that city and added much to its picturesqueness. The new 
 system of rating, however, has made it ruinous for the owner to keep these 
 gardens and so they are being cut up and covered with more or less jerry- 
 built houses. To this extent the change is not for the better, and there is 
 no doubt that in towns the system, without any safeguards, directly tends 
 to the creation of slums." The Australasian, May 19, 1906, p. 1168. 
 
 * Report on the Result of the Census of New Zealand (1901), p. 23; Results 
 of a Census of New Zealand (1911), p. 27. 
 
 * "One of the immediate effects of the new local government law . . .
 
 LAND TAXES IN AUSTRALASIA 115 
 
 ordinary development of the country and the growth in 
 population the value of the land has soon advanced again. 
 In general it is held that while speculation in land is still 
 rife in the colonies, the burden on those who have kept 
 their land undeveloped in the hope of appropriating the 
 increments, has induced many to part with their land. 
 But the purchasing of land for residential and business 
 purposes has been stimulated.^ In South Australia, the 
 subdivision and sale of land by speculators became per- 
 ceptible only after the additional and absentee charges 
 were levied in 1895. "For years past there has been a 
 gradual closing up of all vacant land around the city, a 
 great deal of which may be attributed to the land tax, 
 more particularly since the application of additional and 
 absentee land taxes, in conjunction with the increased 
 rates of income tax imposed at the same time; but much 
 of the movement would have occurred irrespective of tax- 
 ation, with the gradual growth, and advancement of the 
 State." ^ The tendency of speculators to dispose of the 
 land because of the burden of the tax was noticeable also 
 in New South Wales, but as in South Australia other in- 
 fluences cooperated in this movement.' The disintegra- 
 tion process now going on in New Zealand and in the 
 Commonwealth of Australia is the strongest evidence 
 
 is a sharp fall in land values in the suburban districts. . . . None the less, 
 property owners are alarmed. . . . Meanwhile, the slump in suburban 
 land values approaches in violence to something of the kind that happens 
 after boom bubbles have burst. One leading Sydney auctioneer and land 
 valuer gives a most pessimistic account of the suburban land market. He 
 fears a permanent decline in values." The Australasian, June 27, 1908, 
 p. 1614. 
 
 1 "There is less incentive to expend money in land in Queensland than 
 anywhere else, owing to the unimproved value of land having to bear all 
 the local tax." Papers Relative to the Working of Taxation on Unimproved 
 Value in Queensland (Cd. 3890), 1908, pp. 18, 19; also Papers Bearing 
 on Land Taxes, etc. (Cd. 4750), 1909, p. 133. 
 
 Papers Relative to the Working of Taxation, etc. (Cd. 3191), 1906, 
 p. 5. 
 
 Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, p. 133.
 
 116 THE TAXATION OF LAND VALUE 
 
 that a heavy land tax checks speculative land holdings. 
 According to the Commissioner of Taxes of New Zealand,^ 
 where both the legislation and administration of the tax 
 has been most efficient, land speculation is now practically 
 confined to suburban property for building purposes, and 
 "the form of speculation in land unused and held for a 
 prospective increment is rarely met with in recent years." 
 The most that can be claimed for the tax in regard to 
 its effect on speculation is that it discourages the with- 
 holding of land from use, and tends to steady the value 
 of land. 
 
 The experience with the tax on unimproved value is 
 thought to bear out the theory of the incidence of this tax; 
 the land tax, generally speaking, is not shifted by the 
 owner of the land. The farmers, as taxpayers, are said to 
 be burdened heaviest by this system, for in rural communi- 
 ties the value of improvements which go untaxed is in- 
 significant compared with that in cities. As regards the 
 tax for state purposes, however, the small farmer, as we 
 have seen, is exempt for the most part; while as regards 
 local rates, unless the differential system under which the 
 rate of the urban and rural divisions respectively is dif- 
 ferent and adjusted according to the needs of each divi- 
 sion, ^ rating on unimproved value will impose a greater 
 hardship, relatively speaking, upon rural communities.' 
 
 In view of this general consensus of opinion on the inci- 
 dence of the land tax, the following results of a comparison 
 of rentals in towns that rate on the unimproved value and 
 
 ^ The evidence of Mr. Heyes is especially noteworthy because of the 
 investigation which he himself caused to be made among the local 
 authorities, whose testimony he printed verbatim in his report published 
 in Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, pp. 137-40. 
 
 * Cf. supra, pp. 90-91. 
 
 * The following is the report of a local body in New Zealand with re- 
 ference to the incidence of the tax: "Township mostly agricultural land, 
 and complaints made that rates fall heavily on these lands as compared 
 with township residences, hotels," etc. Papers Bearing on Land Taxes, 
 etc. (Cd. 4750), 1909, p. 138.
 
 LAND TAXES IN AUSTRALASIA 
 
 117 
 
 AVERAGE WEEKLY RENTS FOR DWELLINGS IN SELECTED 
 BOROUGHS IN NEW ZEALAND CLASSIFIED ACCORDING 
 TO THE RATING SYSTEM. 1911 
 
 Class of 
 
 S 
 
 h 
 
 5 
 
 6 
 
 7 
 
 8 
 
 9 
 
 10 
 
 boroughs 
 
 rooms 
 
 rooms 
 
 rooms 
 
 rooms 
 
 rooms 
 
 rooms 
 
 roams* 
 
 rooms* 
 
 Twenty-two 
 boroughs 
 
 
 
 
 
 
 
 
 
 rating on 
 
 
 
 
 
 
 
 
 
 unimprov- 
 ed value . . 
 
 8s. 
 
 10.1a. 
 
 12.5a. 
 
 14.4a. 
 
 17.4a. 
 
 19.8a. 
 
 21.3a. 
 
 26.9a. 
 
 Twenty-four 
 boroughs 
 
 
 
 
 
 
 
 
 
 rating on 
 annual or 
 
 
 
 
 
 
 
 
 
 capital 
 value 
 
 6.9s. 
 
 9.1. 
 
 11.5a. 
 
 lS.6a. 
 
 16.2s. 
 
 19.0a. 
 
 22.0a. 
 
 24.7a. 
 
 Seventeen out of the forty-six boroughs considered had no nine-room and twenty-two 
 had no ten-room dwellings. This fact may in part explain the divergence from the generml 
 trend of averages in the other columns. 
 
 those that do not are somewhat startHng. Nevertheless, in 
 viewing the table it must be borne in mind that although 
 the boroughs were selected at random, the only basis of 
 comparison was the system of rating, and that other influ- 
 ences very hkely entered in to account for some of the 
 difference in rental. As shown above the average weekly 
 rental in the twenty-two boroughs which had by 1911 
 adopted the tax on the unimproved value was approxi- 
 mately one shilling higher (except in the case of the nine- 
 and ten-room dwellings) than in the twenty-four boroughs 
 imder the old system of rating. ^ Attention must, however, 
 be called to the fact that the inordinately high rentals in 
 
 * The names tod the population of the towns under consideration are 
 given in the tables supra, pp. 111-12. The averages were computed from 
 data in the Report on the Results of a Census of New Zealand (1911), p. 
 26. It is necessary to mention that in the computation of the averages 
 the fractions of a shilling were disregarded. 
 
 * Three of the twenty-four boroughs have since adopted rating on the 
 unimproved value.
 
 118 
 
 THE TAXATION OF LAND VALUE 
 
 Wellington, whose population is considerably above that 
 of any city in the other class of boroughs, raised the aver- 
 age of the group of towns rating on the unimproved value. 
 Moreover, that the effect of the tax is not gauged by the 
 comparison of rentals is clearly shown in the subjoined com- 
 parison of the four principal cities of New Zealand. 
 
 If the rating system and population were the sole deter- 
 minants of the variation in the rentals of the four cities, the 
 lower rental in Dunedin than in Auckland for dwelhngs of 
 from three to six rooms would not be explainable. The 
 population of Dunedin was in 1911, 48,988, of Auckland 
 47,783, while both cities had the same rating system. Nor 
 is the lower rental in Christchurch, with a population of 
 55,098, and the higher rental in Wellington, with a popu- 
 lation of 66,338, as compared with Auckland to be explained 
 by the tax on land value. The preceding tables, neverthe- 
 less, are significant in dispelling the claim that the tax on 
 the unimproved value has reduced rents. 
 
 Only a few authorities reporting to the British Com- 
 
 AVERAGE WEEKLY RENTALS IN THE FOUR LARGEST 
 CITIES OF NEW ZEALAND IN 1911* 
 
 
 Boroughs rating on 
 
 Boroughs rating on 
 
 Class of 
 dwellings 
 
 unimproved value 
 
 annual value 
 
 
 
 
 
 
 Wellington 
 
 Christchurch 
 
 Auckland 
 
 Dunedin 
 
 
 s. d. 
 
 s. d. 
 
 8. d. 
 
 s. d. 
 
 8 Rooms. . . . 
 
 11 5.83 
 
 7 11.16 
 
 8 5.88 
 
 7 9.29 
 
 4 " .... 
 
 14 4.26 
 
 10 5.97 
 
 10 9.94 
 
 10 6.01 
 
 6 " .... 
 
 17 1.88 
 
 13 2.88 
 
 13 5.48 
 
 13 1.04 
 
 6 " .... 
 
 1 11.58 
 
 15 5.22 
 
 16 2.80 
 
 15 11.21 
 
 7 " .... 
 
 1 5 1.15 
 
 18 10.48 
 
 18 10.51 
 
 19 1.29 
 
 8 " .... 
 
 1 9 3.96 
 
 1 8.82 
 
 1 2 4.08 
 
 1 4 0.22 
 
 9 " .... 
 
 1 15 8.99 
 
 1 2 11.69 
 
 1 4 8.46 
 
 1 6 6.50 
 
 10 " .... 
 
 I 19 5.10 
 
 1 6 6.75 
 
 1 11 10.32 
 
 1 7 8.87 
 
 * Report on the Results of a Census of New Zealand (1911), p. 26.
 
 LAND TAXES IN AUSTRALASIA 119 
 
 mission mentioned a fall in rental; in general the effect 
 on rents seems to have been slight; and where, as in New 
 South Wales, rents were reported to have declined, the 
 cause of the depreciation was attributed to some other 
 factors besides the tax.^ 
 
 But one may well inquire why rents should not have fallen. 
 For it might be expected, as a result of the check in land 
 speculation, of the better utilization of vacant land, of the 
 exemption of improvements from taxation, and of the 
 added stimulation given to building operations, that more 
 houses would be available and that rents would decrease. 
 The reason for the stability and in some cases the increase 
 in rents may be found either in the failure of the tax to 
 reduce speculation and to stimulate building operations; 
 or in the rapid influx of immigrants, which has tended to 
 counteract the putative tendencies of the tax and to en- 
 hance the value of the land. For, although immediately 
 upon the enactment of the legislation the realty market 
 may experience a depression (without a change in rents), 
 the upward tendency of land value soon asserts itself 
 again. 
 
 Summary: In so far as the efficacy of the land tax can be 
 gauged at all, the results of the levy have been more or 
 less beneficial economically and socially. Housing condi- 
 tions continue to improve in the colonies in spite of the 
 increase in population. Had the rates of taxes been con- 
 siderably higher the effects on land speculation, perhaps 
 too on rents, would have been more notable. To what 
 extent the exemption of business premises from heavy 
 
 * "Rents of large residences have declined considerably, but to what 
 extent the Land Tax has been a lever it is difficult to say. It has certainly 
 operated to some extent, but there have been other factors at work." 
 Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, p. 133. "The taxa- 
 tion of the unimproved value of land in any area," reports an official of 
 Queensland, "omitting altogether a tax on improvements, necessarily 
 lightens the burden in the instance of improved properties. This should 
 and does enable the rent charge to be lessened." IMd., p. 210.
 
 120 THE TAXATION OF LAND VALUE 
 
 taxes has in turn stimulated business can only be in- 
 ferred. 
 
 In conclusion, two significant facts are to be noted. 
 First, in no case has there been a repeal of the tax except 
 to extend its operation; in other words, after its adoption, 
 however great the opposition may previously have been, 
 the levy of the tax ceased to be a party measure. Indeed, 
 the opponents of the tax seem to have become reconciled 
 to its existence; at best they have attempted merely to dis- 
 prove the beneficent results predicted by the sanguine 
 supporters of the land tax.^ Secondly, the adoption of the 
 tax by one state after another, by the local bodies,^ and 
 recently by the federal government of Australia, argues 
 in its favor and for its expediency in that country. 
 
 ^ This appears to be the attitude of such an opponent of the tax as the 
 editor of The Australasian, from which we have quoted. 
 
 * There was a movement on foot in Tasmania to introduce rating on 
 the unimproved value of land. Land Valuation Bills were before the 
 Assemblies in Victoria and Tasmania, and as pointed out before, the for- 
 mer state now rates on land value. Cf. The Australasian, July 25, 1908, 
 p. 229; September 25, 1909, p. 823.
 
 CHAPTER IV 
 
 THE TAX ON VALUE INCREMENT IN GERMANY 
 
 1. Like the adoption of the land tax in Australasia, 
 the spread of the tax on value increment in Germany has 
 been rapid; within the last decade, it is noteworthy, the 
 tax has appeared as a local, state, and federal measure. 
 In Germany the local increment tax laid the foundation 
 and became the model of the state and imperial taxes. 
 Hence, in spite of the suspension practically of the local 
 and state systems since the introduction of the " Reichs- 
 zuwachssteuer " (the imperial increment tax), the local 
 taxes must nevertheless be studied in order to understand 
 the causes, purpose, form, and expediency of the present 
 system. 
 
 At the outset we are confronted with certain differences, 
 both in form and character, between the German local tax 
 and the local system studied in the preceding chapters. 
 The latter is a direct, the former an indirect levy; in one 
 case, the tax falls on the selling value, in the other, on the 
 value increment; the one is a proportional, the other a pro- 
 gressive tax; the one tends to become a single tax for local 
 purposes, the other to be merely a supplementary source 
 of revenue. How are these differences to be accounted for.? 
 The explanation is to be found in the radically diverse fiscal 
 systems of German and Anglo-Saxon communities re- 
 spectively. 
 
 In England the development of the present system of 
 rating on real property in the local bodies can be traced 
 from the Elizabethan law of direct taxation on property. 
 This system has not only remained uniform and unchanged 
 in England, but has been taken over and is in vogue in her 
 colonies generally. In contrast with this method of rating.
 
 122 THE TAXATION OF LAND VALUE 
 
 local taxation in Germany comprises many kinds of taxes, 
 is less uniform in the different states, and has undergone 
 numerous revisions. Indeed, as the development of Ger- 
 many in general has been a tardy one, so the development 
 of her fiscal policy has lagged behind that of other nations.* 
 If we may be permitted to summarize the local fiscal sys- 
 tems, rendered complex on account of the different civic 
 divisions of local government,^ on account of the variety 
 of need in different sections of the country, and on account 
 of the variety of legislation of the separate states, local 
 revenue in Germany is, speaking generally, derived both 
 from the levy of indirect and direct taxes. The former 
 consist mainly of excises on consumption commodities, 
 the latter comprise in the main, the land, building, and 
 business taxes, the income tax and the tax on interest.' 
 Thus the systems of local taxation followed the same 
 development as the state fiscal policies; indeed, the taxes 
 levied by the local authorities are often supplemental 
 rates, or percentages added to the state taxes. The prin- 
 ciple of taxation conforming to this complex system, and 
 consciously formulated in some of the local tax laws, is that 
 of faculty ("nach seinem Vermogen und mit seinen 
 Kraften") * in contrast to that of benefit, the principle of 
 quid pro quo to which, many would hold, the English rating 
 system conforms. 
 
 But, since we are concerned with a land tax, it is neces- 
 sary to note the r61e that land plays in Germany as a 
 source of local revenue. The land, house and business taxes 
 displaced the old general property tax of Prussia in 1861. 
 A revaluation of the land on the basis of the average net 
 
 1 Cf. Wagner, Finanzvnasenachaft, i Aufl., 3 Tl., 93. 
 
 * Gemeinden, Districte und Kreise, in Prussia; Gemeinden and KOr- 
 perschaften, in Baden; etc. 
 
 ' Grund-Gebaude-Gewerbesteuem, Einkommen- und Kapitalrenten- 
 steuem. The systems have been simplified recently by the enactment 
 of the Prussian "Kommunalabgabengesetz" of 1893, and similar state 
 measures. 
 
 * Cf. Wagner, op. cU., 4 Tl., 26.
 
 TAX ON VALUE INCREMENT IN GERMANY 123 
 
 product of the land was then made and the land tax was 
 apportioned among the local bodies, and has since then 
 remained a fixed land charge. The defects of this tax are 
 admitted by all authorities. ^ The tax on houses which is a 
 separate tax is levied on the basis of the average annual 
 rental during the ten-year period preceding the valuation. 
 The assessment is subject to revision only once in fifteen 
 years. This tax hkewise weighs unequally on different 
 taxpayers. That land has contributed httle to the local re- 
 ceipts can be seen from the following data showing the per- 
 centage of the total tax receipts collected from the " Grund- 
 und Gebaudesteuem " in 1889, in the following important 
 German cities: ^ 
 
 Per cent Per cent Per cent 
 
 Altona 49.20 Kassel 16.80 Breslau 10.16 
 
 Stuttgart... 28. 53 Wiesbaden 16.34 Magdeburg 8.93 
 
 NUmberg . . .21 . 86 Dresden 16.18 Miilhausen i. E,. . 8 . 45 
 
 Karlsruhe . . 21 . 05 Darmstadt 15 . 27 Strassburg i, E. . . 5 . 66 
 
 Mannheim. 20.88 Frankfurt a. 15.18 Metz 4.44 
 
 MUnchen ..20.54 Berlin 14.84 Frankfurt a. M ... . 
 
 Mainz 17.81 Augsburg 13.31 
 
 Leipzig 18.68 Cologne 11.69 
 
 With few exceptions (Altona, Stuttgart) land was not a 
 very important source of income, contributing about one- 
 fifth of the local revenue in four cities and less in the others. 
 Frankfurt a. M., it will be noted, levied no land and house 
 taxes. Instead, a rental tax (Mietsteuer) was levied in 
 that city as well as in other cities (Beriin, for example). 
 In some of the above-mentioned municipaKties, Altona, 
 Frankfurt a. M., Leipzig, and Dresden, a tax on land trans- 
 fer is charged. On the whole, however, in comparison with 
 Anglo-Saxon countries, the burden of taxation on land is 
 a light one. 
 
 Wagner, op. cit., 4 TI., 13. Cf. Adickes, "Uber die Weitere Ent- 
 wicklung des Gemeinde-Steuerwesens auf Grund des preussischen Kom- 
 munalabgabengesetzes vom 14 Juli 1893." Zeitschrift fur die gesamte 
 Staatsvnssenschaft, vol, L (1894), p. 685. 
 
 * Ibid., p. 415.
 
 124 THE TAXATION OF LAND VALUE 
 
 From this brief sketch of the local tax systems it will be 
 readily seen that in Germany a direct proportional tax on 
 the unimproved value of land, such as was developed in 
 Australasia, would have been anomalous and revolutionary. 
 
 2. Having shown why the German land-value tax had 
 to assume an essentially different character from the tax 
 on unimproved value, we shall in the following sections 
 attempt to account for the form it did assume. The epoch- 
 making reform in local taxation was the Prussian "Kom- 
 munalabgabengesetz " of July 14, 1893. Its importance lies 
 not so much in the increase of taxing powers granted to 
 the local governments,^ as in the division of revenue sources 
 between the state and local authorities. The Act is signi- 
 ficant, moreover, not because it empowered the communi- 
 ties to levy direct and indirect taxes on property and land ^ 
 (taxes they already levied), but because it took from the 
 communities the power (1) of raising income taxes (except 
 as percentages added to the state income taxes ^) and 
 (2) of introducing excise duties on meat, grain, flour, 
 pastry, potatoes and fuel; and where these taxes already 
 existed, the rate of tax could not be increased.* These re- 
 strictions, it is clear, have made the local bodies more de- 
 pendent upon property for revenue and have aided in the 
 endeavor to make local fiscal policy conform with the bene- 
 fit principle of taxation.^ 
 
 The " Kommunalabgabengesetz," in fact, did more. In 
 
 ^ Local autonomy in taxation dates back to very early times in German 
 history; but all taxing powers were taken from the local governments by 
 Friedrich Wilhelm I (1738) and only restored to them in 1808. Cf. Wag- 
 ner, oTp. cU., 4 Tl.. 26. 
 
 * Preussisches Kommunalabgabengesetz vom H Jvli 1893, IS, 20, 
 28,24. 
 
 Ibid., 36. * Ibid., 14. 
 
 ' This tendency to simplify local taxes in conformity with economic 
 principles is shown in the recent legislation of the other German states. 
 Saxony had relegated the land tax to the local governments as early 
 as 1873. Cf. Verhandlungen des Vereins fur Sozialpolitik (1911), pp. 
 14/., 18.
 
 TAX ON VALUE INCREMENT IN GERMANY 125 
 
 authorizing the communities to levy special land taxes 
 (besondere Steuern vom Grundbesitz) and to tax building 
 sites (Bauplatze) at a higher rate than other property,^ 
 the Act opened the way for the levy of a discriminatory 
 tax on land. These taxes which took the form of the 
 "Bauplatzsteuer" and "Steuer nach dem gemeinen Wert" 
 were indeed the precursors of the tax on value increment. 
 Among these antecedent attempts to discriminate against 
 land in taxation the "Umsatzsteuer" must be included. 
 We turn to the consideration of these land taxes. 
 
 3. The "Umsatzsteuer" collected on the occasion of 
 a transfer of real property very probably developed out 
 of the prevailing practice of charging a fee for registering 
 and transferring the deed of sale.^ That it was originally in- 
 tended as a fee appears from the names of the charges. 
 Thus in Emden (as early as 1670) it was known as "Siegel- 
 geld," seal money; ^ in Danzig, as "Kaufschoss," stamp 
 duty on conveyance; in Hildesheim (1374), as "Litkaufs- 
 geld," originally drink-money.* Whether the fiscal ex- 
 pediency of the charge, or some other cause, led to its de- 
 velopment into a tax, the "Umsatzsteuer" must now be 
 regarded as a tax, instead of a fee, for the following 
 reasons: 
 
 (1) The amount of tax is a percentage of the selling 
 price of the property; the charge is, therefore, not pro- 
 portioned to the expense of the service as in the case of a 
 fee. 
 
 (2) In most cases (Leipzig, Dresden, and Chemnitz are 
 exceptions), no charge is paid when the exchange of prop- 
 
 ^ Preuasisches Kommunalabgabengesetz vom H Juli 1893, 25, 27. 
 
 * The system of land registration in the "Grundbuch" is almost uni- 
 versal throughout Germany. Cf. Papers Bearing on Land Taxes, etc. 
 (Cd. 4750), 1909, p. 12. 
 
 * Not only upon the sale of real property but upon the sale of ships, 
 "Siegelgeld" was collected. Cf. Adickes, op. cit., p. 434. 
 
 * The fee displaced the wine-drinking upon the close of a bargain. Cf. 
 Lilbben, Mnd. Handworterbuch, p. 208.
 
 126 THE TAXATION OF LAND VALUE 
 
 erty is the result of a gift, or of a bequest; showing that the 
 tax was intended to fall on exchanges of property involving 
 profits. 
 
 (3) The receipts from this tax are devoted to other pur- 
 poses than to cover the cost of service. Thus in Dresden the 
 receipts are used for poor reUef, schools and fire protection.^ 
 Similarly in other cities. 
 
 The " Umsatzsteuer " is widespread throughout Ger- 
 many. Under the name of "Wahrschaftsgeld" this trans- 
 fer tax, levied continuously since 1820,^ is still a prolific 
 source of revenue for Frankfurt a. M. In Prussia, all but 
 thirteen out of the two hundred and sixty-six cities of more 
 than 10,000 inhabitants levy land-transfer taxes.' The rate 
 of tax in Prussia varies in the different cities, from one to 
 two per cent of the value of the property including the 
 structures and improvements. BerUn and Konigsberg levy 
 the tax, drawing a distinction between improved and un- 
 improved land ; in Berlin the rate is one per cent in case 
 of exchanges of improved land, two per cent in case of 
 unimproved land, while in Konigsberg it is two per cent 
 and three per cent in the city and suburbs respectively.* 
 
 The tax on land transfers is also prevalent in the other 
 German states. In Hessen, for example, the "Umsatz- 
 steuer " is levied for state purposes, but the local bodies were 
 granted, in 1907, the option of levying supplementary rates 
 not to exceed fifty per cent of the revenue of the state tax. 
 This additional levy must be in accordance with the fol- 
 lowing progressive scale.^ When the value of the property 
 sold is less than 1000 marks, the rate is .1 per cent: 
 
 * Cf. Adickes, op. dt., pp. 440-41. 
 
 ' Schriften des Vereins fiir Sozialpolitik (1910), vol. cxxvii, p. 15; cf. 
 with Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, p. 10, where 
 the "Wahrschaftsgeld" is said to have been levied as early as 1801 in 
 Frankfurt. 
 
 * Schriften des Vereins fiir Sozialpditik (1910), vol. cxxvii, p. 15. 
 
 * Konimunales Jakrbuch (1910), pp. 615-16. 
 
 * Schriften des Vereins fiir Sosialpolitik (Gemeindefinanzen), vol. 
 cxxvi, p. 62.
 
 TAX ON VALUE INCREMENT IN GERMANY 127 
 
 Prom 1,000 to 2,000 marks, the rate is .2 per cent 
 
 2,000 " 10,000 "A " " 
 
 ** 10,000 " 20,000 " " " " .6 " " 
 
 * 20,000 " 60,000 " ' .8 " " 
 
 Over 50,000 " " " " 1 " " 
 
 In 1903, the commimes of Wtlrttemberg were similarly 
 empowered to impose an "Umsatzsteuer," of which the 
 maximum rate was not to exceed one per cent additional 
 to the rate levied for state purposes.^ The rate in Baden is 
 fixed for the local governments at one-half per cent. The tax 
 is obligatory and is levied as a supplement to the state 
 transfer tax.'' The local rate in Bavaria is one-half per cent, 
 forming an addition to the state tax.' Similarly in Saxony, 
 where 2400 communes levy land-transfer taxes at rates 
 varying from eight-hundredths per cent to one per cent. 
 The state tax is limited to a minimum rate of one-half per 
 cent of the selling price of the property.* It is noteworthy, 
 that in contrast to these low rates of tax, the state "Um- 
 satzsteuer " in Alsace-Lorraine is five and one-half per cent 
 (including the fee for recording of deed). This shows the 
 influence of France where the exchange tax is unusually 
 high, being over six per cent.* 
 
 The importance that the "Umsatzsteuer" has assumed 
 in Germany is due in great part to the propaganda, since 
 the seventies, of men like Adoph Wagner who have urged 
 the expediency of the tax on the ground that the commun- 
 ity is entitled to share the profits accruing from the great 
 appreciation in land value in urban communities. The 
 recognition of the evils that speculation in land occasions, 
 and of the enormous profits reaped by individuals by virtue 
 of their ownership, not toil, is general. Hence the " Um- 
 satzsteuer." 
 
 * Schriften des Vereins fur Sozial-politik, vol. cxxvi, pp. 88-89. 
 
 lUd., p. 119. lUd., p. 221. * Ibid., p. 262. 
 
 Adickes, <yp. cit., pp. 441-42. For the prevalence of the "Umsatz- 
 steuer " in Germany cf. also Bimbaum, Die Gemeindlichen Steuersyt- 
 teme in DeiUschland.
 
 128 THE TAXATION OF LAND VALUE 
 
 4. But by itself the "Umsatzsteuer" was ineffective. 
 And under the slight burden of the " Grundsteuer " specu- 
 lation continued and great fortunes were made through the 
 enormous appreciation in the value of the land following 
 the industrial awakening of Germany after 1871. And as 
 the budget of the municipalities grew with the development 
 of the cities, it became more and more evident that the ur- 
 ban landowners who benefited most through the growth 
 of the city were not contributing their full quota to the 
 revenue. To make them do so, it was necessary to tax 
 their land on the basis of its selling price, or capital value, 
 not as formerly on its product. This was the origin of the 
 "Steuer nach dem gemeinen Wert." Like the old land tax 
 this is a direct levy, but the basis of valuation is now the 
 market value of the land. The rates vary from two to four 
 per cent of the value of the property (improvements are 
 generally included). 
 
 The first attempt to substitute "capital value" for prod- 
 uct as the basis of taxation was made in Bremen. The 
 Act passed in 1874 changed the rate of the old tax from one 
 and a half to two mills, and provided for the assessment of 
 urban property on the basis of its selling value. ^ In answer 
 to the protest, which the latter provision aroused, the 
 "Senatskommissar" replied that "in his opinion the sell- 
 ing value was the correct basis of valuation. In the case of 
 purely agricultural land under cultivation the selling value 
 was identical with the produce value (Ertragswert). In case 
 of land used for agricultural purposes but which could be 
 sold for building sites, the selling value exceeded the usu- 
 fruct value. It was, therefore, proper that the selling value 
 be made the basis of valuation. The selling value of land 
 was a profit which accrued to the owner not by virtue of 
 his own labor but through the labor and toil of many per- 
 sons. Therefore, it was proper that the community demand 
 a tax from this source." ^ As already mentioned, this senti- 
 
 * Adickes, op. cit., p. 599. ' Ibid.
 
 TAX ON VALUE INCREMENT IN GERMANY 129 
 
 ment was voiced not only by the economists but by public 
 men in the Prussian Parliament and in the "Verein fUr 
 Sozialpolitik." ^ 
 
 But while this first attempt failed and the Bremen Act 
 was repealed (1878) because of the difficulties of valuation,' 
 the movement spread. Thus, in Prussia, twenty-seven 
 cities out of the thirty-four with a population exceeding 
 75,000 had, in 1908, levied such a tax. Three more, Kassel, 
 Frankfurt a. M., Posen, made the selling value the basis 
 of the valuation of undeveloped land, but rental the basis 
 for valuing improved land. Only Altona, Halle, and Han- 
 nover of the largest cities persist in taxing the usufruct 
 instead of the land value.' So do also the smaller communi- 
 ties especially in Eastern Prussia. The reason is that they 
 are chiefly rural and the selling value of the land corre- 
 sponds closely with the value on the basis of productivity. 
 In Hessen, Saxony, and Baden the tax on selling value 
 is in force. In Baden the law even provides that the tax 
 commissioner of urban communities should make an 
 onnwa/ valuation of the building land and should increase 
 the assessed valuation, as soon as the value had appre- 
 ciated at least ten per cent above that of the preceding 
 year.^ Indeed, the expediency of the "Steuer nach dem 
 gemeinen Wert" for urban property is everywhere ac- 
 knowledged.* 
 
 5. In making the taxation of land on the basis of 
 capital value optional with the local governments,* and 
 
 ^ Adickes, op. cit., pp. 612-13. 
 
 ' Because of the "fictitious" land values due to overspeculation, the 
 assessors had overvalued the land for assessment purposes. Great re- 
 ductions had to be made when the appeals were heard. Cf. ibid., p. 601. 
 
 ' Schriften des Vereins fiir Sozialpolitik, vol. cxxvn, p. 13. 
 
 * Ibid., vol. cxxvi, pp. 26-27, 256. 136-37. 
 
 * Ibid., pp. 14, 15. "Die Besteuerung des Gnmdeigentums, das schon 
 Baugelande geworden ist, oder es in absehbarer Zeit zu werden verspricht, 
 nach seinem gemeinen Wert und nicht nach seinem Ertrag wird auch 
 heute kaum noch emstlich bekampft." Ibid., p. 27. 
 
 * Preusaischea Kommunalabgabengesetz (1893), 25.
 
 130 THE TAXATION OF LAND VALUE 
 
 in sanctioning the discriminatory tax on building sites,* 
 the "Kommunalabgabengesetz" of 1893 aided greatly the 
 movement of land-value taxation. The government recog- 
 nized thereby the serious problems, fiscal and social, which 
 the political and economic changes had brought to pass. 
 The question of the best means by which the local bodies 
 might appropriate part of the "unearned increment" ac- 
 cruing from land was the vital point at issue. Two possi- 
 bilities presented themselves. First, in conformity with 
 27 of the Act, a direct tax on land might be introduced, 
 differing from the old land tax (Grundsteuer) as follows: 
 (1) instead of rental value as the base of the tax, the selling 
 value might be substituted; (2) instead of treating all land 
 ahke, the property might be divided into several classes, 
 each class subject to a different rate of tax, or to a different 
 basis of assessment. 2 The objections to such a tax, however, 
 were serious. Not only would the classification be arbi- 
 trary and difficult to make, but the valuation system for 
 which no scientific precedent existed in Germany, would 
 incur such inequaHties in assessment as in the Bremen 
 experiment. Moreover, a revision of the old apportioned 
 land tax, it was feared, would weigh heavily on mortgaged 
 property' and on the bona fide owner as compared with the 
 speculator. 
 
 Secondly, an indirect tax to fall only on the "unearned 
 increment " might be levied. Already, the expediency of the 
 "Umsatzsteuer" was generally recognized. And from this 
 tax to the tax on value increment was a short step. Even 
 
 ^ Preussisches Kommunalahgabengesetz (1893), 27: "Die Steuern vom 
 Grundbesitz sind nach gleichen Normen und Satzen zu verteilen. Lie- 
 genschaften, welche durch die Festsetzung von Baufluchtlinien in ihrem 
 Werte erhbht worden sind (Bauplatze), kSnnen nach Massgabe dieses 
 hQheren Wertes zu einer hoheren Steuer als die Ubrigen Liegenschaften 
 herangezogen werden. Diese Besteuerung muss durch Steuerordnung 
 geregelt werden." 
 
 ^ Under 27 uniform tax rates and uniform assessment bases within 
 each class, are required. Cf. Note 1, supra. This bars out a progressive 
 scale from the direct land tax. Cf. Adickes, op. cit., p. 633. 
 
 * Adickes, op. cit., p. 444.
 
 TAX ON VALUE INCREMENT IN GERMANY 131 
 
 the progressive scale was applicable to the "Umsatzsteuer** 
 as we saw in the case of Hessen.^ This latter tax, then, was 
 the origin of the "Wertzuwachssteuer." 
 
 The close relation between the transfer and increment 
 taxes will be clear from the following analysis of the tax 
 on value increment. The characteristics peculiar to it are 
 the following: 
 
 (a) The tax is charged on specific occasions of transfer 
 of real property. 
 
 (b) The tax falls on the increment, that is, on the differ- 
 ential between the prior purchase price and the selling 
 price on the occasion of the transfer. 
 
 (c) The basis of assessment is the selling value. 
 
 (d) The tax falls on the land apart from the improve- 
 ments. ^ 
 
 As regards (a) and (c), the form of tax and basis of as- 
 sessment, the tax on value increment does not differ from 
 the "Umsatzsteuer." But as regards (6), the base of tax, 
 there is a deviation from the "Umsatzsteuer." This dis- 
 tinctive feature of the tax on value increment is, however, 
 not without precedent. Under the income taxes in Ger- 
 many, it is noteworthy, profit made in any "Konjunktur" 
 transaction or through the exchange of property is taxable 
 as a form of income.' In Hamburg, for example, the In- 
 
 ^ The justice of progressive taxation was considered greater in the case 
 of the unearned increment accruing from land than in the case of the 
 income tax. Ibid., p. 642. It is interesting, as showing the close rela- 
 tionship between these taxes, that B. Eberstadt (Entwurf einer Bau- 
 platzsteuer) proposed a progressive "Umsatzsteuer" instead of the 
 "Zuwachssteuer." Cf. Preussiache Jahrbiicher (1893), vol. Lxxiv, p. 480. 
 In Bavaria too the property transfer tax is progressive. Cf. Bimbaimi, 
 op. cit., p. 203. 
 
 * It has been asserted that the "Wertzuwachssteuer" is a tax on real 
 estate, not on pure land value. Cf. Seligman, Essays in Taxation (ed. 
 1913), p. 515. This is correct in so far as it applies to the imperial tax, but 
 is the result of the partisan influences brought to bear on the legislation 
 of that tax. See infra, 13. 
 
 * Cf. Fuisting, Die Preussischen direkten Steuem (6th ed.). vol. I, pp. 61 
 ff. C/. also 12 of the Einkommensteuergesetz vom 24 Juni 1891, "Ein- 
 komen aus Kapitalvermogen."
 
 132 THE TAXATION OF LAND VALUE 
 
 come Tax Law of 1903 provides for the assessment of the 
 "profit made on any transaction of sale of real property . . . 
 the amount taxable being the difference between the sell- 
 ing price and the pm-chase price, expenditure on perma- 
 nent improvements being added to the purchase price in 
 making the calculation." ^ 
 
 The validity of the last characteristic (d) may at first 
 be questioned because, apparently, the selling price of the 
 property (improvements included) is made the basis of 
 assessment just as, for example, in the "Umsatzsteuer." 
 In reality, however, it is the purpose of the deductions and 
 additions to the selling and purchase prices, ^ to exempt 
 the value accruing from the investment of capital and labor. 
 In fact, it is the method of computing the value increment, 
 not the principle, which is in question. The system of 
 scientific valuation of land apart from improvements has 
 made little progress in Germany,' even though the land and 
 house taxes have long been separately assessed. The prin- 
 ciple of exempting the structures and improvements from 
 the increment tax, however, cannot be separated from the 
 principle of the "Zuwachssteuer" itself, because (1) the 
 value of the buildings and improvements does not increase 
 with time, and (2) any value of the property due to such 
 improvements, it is reasoned, is the legitimate return from 
 capital and not to be placed in the same category with 
 the "unearned increment." 
 
 6. To show further the correlation between the tax on 
 value increment and the "Umsatzsteuer," the first "Zu- 
 wachssteuer" enacted will here be examined. The Frank- 
 furt a. M. Act, as well as the laws of Cologne,* Gelsenkirchen, 
 
 1 Cited in Papers Bearing on Land Taxes, etc. (Cd, 4750), 1909, p. 16. 
 
 * See infra, 13. 
 
 Cf. Verhandlungen des Vereins fiir Sozialpolitik in Niirnberg (1911), 
 in Schrifien des Vereins fiir Sozialpolitik, vol. cxxxviii, p. 97. 
 
 * The Cologne law provides that when the seller has paid an increment 
 tax, the purchaser may deduct the amount of the tax from the transfer 
 tax payable by him; but the amount so deducted must not exceed fifty
 
 TAX ON VALUE INCREMENT IN GERMANY ISS 
 
 Magdeburg, Gorlitz, Hannover, Berlin, is a compound of 
 the land-transfer and the progressive value-increment taxes. 
 The tax on value increment is merely supplemental to 
 the land-transfer tax. The Frankfurt ordinance in which 
 both taxes are incorporated is the "Wahrschaftsgeldord- 
 nung" of 1904. It comprises, in reality, three taxes: 
 
 (1) An ordinary transfer tax of two per cent of the selling 
 price. 
 
 (2) A progressive transfer tax collectible in addition to 
 the ordinary transfer tax, in case of land which has not 
 changed hands in more than twenty years. This additional 
 tax is chargeable only when the selling price on the occa- 
 sion of levy exceeds the last purchase price by an amount 
 greater than the amount of the additional tax.^ The base 
 of the tax is the selling price of the property; and a dis- 
 tinction is drawn between improved and unimproved land, 
 as the following scale of rates shows: 
 
 (a) For improved estates, if there has elapsed, since the 
 last preceding change of ownership, 
 
 More than 20 years, but not more than 30 years, 1 per cent 
 
 " 30 " " " " " 40 " 1^ " " 
 4Q 2 . 
 
 (6) For unimproved property, if there has elapsed, since 
 
 the last preceding change of ownership, 
 
 More than 20 years, but not more than 30 years, 2 per cent 
 " 30 " " " " " 40 " 3 " " 
 
 < ^Q (i gQ ^ f C< 
 
 " 50 " " " " " 60 " 5 " " 
 " 60 " 6 " " 
 
 per cent of the whole transfer tax. ( 1.) Moreover, it is provided that 
 whenever the tax on value increment reaches a sum greater than 400,000 
 marks, the rate of the transfer tax shall be reduced by one-half of one 
 per cent; when it reaches a sum greater than 800,000 marks, the reduc- 
 tion of the rate of the transfer tax shall be one per cent. ( 15.) Cf. 
 Kommunales Jahrbuch (1909), vol. i, p. 675. The law is translated in 
 Quarterly Journal of Economies, vol. xxii, pp. 106 ff. 
 
 ^ Revised ordinance, 1906, 3. Translated in Papers Bearing on Land 
 Taxes, etc. (Cd. 4750), 1909, pp. 20 jf. To ascertain whether the property 
 has appreciated in value, the expenditures on permanent improvements, 
 including new buildings, or alterations to buildings, must be added to the 
 previous purchase price.
 
 134 THE TAXATION OF LAND VALUE 
 
 (3) The third tax embodied in the ordinance is the tax 
 on value increment. This is likewise an additional charge 
 collectible only in case of land which has changed hands 
 within less than twenty years. The base in this case is the 
 value increment, ascertained by taking the difference 
 between the last purchase price and the present selling 
 price. In computing the value increment, however, the 
 following additions to the purchase price are made: 
 
 1. The expenditure of permanent improvements, in- 
 cluding cost of street construction and sewer charges, the 
 cost of new buildings or alterations; ^ 
 
 2. Five per cent of the previous purchase price as com- 
 pensation for the cost incurred in connection with the pre- 
 vious transfer; this includes the stamp duty, transfer tax, 
 court charges, etc.; 
 
 3. In case of unimproved land, not used for purposes of 
 agriculture or industry by the vendor, four per cent of the 
 purchase price, excluding compound interest, as compen- 
 sation for capital invested. 
 
 Moreover, the increment tax is not levied if the value 
 
 increment is less than fifteen per cent of the purchase 
 
 price (the above additions included). ^ The progressive scale 
 
 of rates is as follows: 
 
 2% of the increment, if the increment is 15 to 20% of the purchase price 
 
 8% " " " " 20 " 25% " " 
 
 4% " " 25 " 30% 
 
 6% " " " ' 30 " 85% 
 
 And so on, one per cent for every five per cent of increment 
 until the maximum rate of twenty-five per cent tax is 
 reached. And this increment tax is paid in addition to the 
 land-transfer tax. 
 
 7. Such was the origin, from a fiscal standpoint, of the 
 "Wertzuwachssteuer." Let us now consider the under- 
 lying principles of the tax, in so far as they have evolved 
 
 * Revised ordinance, 4. To the extent to which such expenditures 
 are covered by insurance, however, no account shall be taken of them. 
 
 * In the original Act of 1904 an increment of less than 30 per cent was 
 exempt.
 
 TAX ON VALUE INCREMENT IN GERMANY 135 
 
 out of German conditions and out of the needs of the time. 
 These principles will be considered under the main heads 
 of "unearned increment," "German Sozialpolitik," and 
 "benefit" in taxation. 
 
 One reason the "unearned increment" concept has until 
 recently been associated chiefly with the income from land 
 is the fact that the gains accruing from urban land holdings 
 have been extraordinarily striking. Especially true has this 
 been in Germany.^ Until the Franco-Prussian War Ger- 
 many was predominantly an agricultural country. But 
 after the seventies, as a result of the competition of Amer- 
 ica and Australasia in the European market, the decline in 
 agricultural production set in, and the wretched condition 
 of the peasantry, especially in eastern Germany, where the 
 large estates prevailed, began to arouse the concern of the 
 statesmen. Strange as it may seem, it is to this apprehen- 
 sion, which engendered the policy of fostering superior 
 workmanship and commercial enterprises, that the indus- 
 trial awakening of Germany must be traced. This develop- 
 ment followed hard upon the victory over the French and 
 the consolidation of the German Empire. Rural districts 
 and villages rapidly changed into urban and industrial com- 
 munities. The growth in urban population was phenomenal. 
 The following table shows something of the increase : ^ 
 
 * Dr. Miquel, Prussian Minister of Finance in 1893, pointed out the 
 enormous rise in the value of urban land in Germany, which he claimed had 
 appreciated in value more than in England. Cf. Adickes, op. cit., p. 624. 
 
 * Compiled from data in the Statistisches Jahrbtich fiir das Deutsche 
 Reich (1911), p. 22, and the Statistisches Jahrbuch deutscher Stddte (1907), 
 p. 44. The following table (from Archie fiir Soziale Gesetzgehung und 
 Staiistik, 1893, p. 433) shows the rapid rise of urban communities: 
 
 Class of towns 
 
 1871 
 
 1890 
 
 Number 
 
 Populalion 
 
 Number 
 
 Populalion 
 
 Population 
 Over 100 000 
 
 8 
 
 75 
 
 529 
 
 1716 
 
 1.968,537 
 3,147,272 
 4,588.364 
 6,086,625 
 
 26 
 
 124 
 
 683 
 
 1951 
 
 6,302,883 
 4,500,520 
 6,054,629 
 5,805,893 
 
 20,000 to 100 000 
 
 6,000 to 20 000 
 
 ' 2,000 to 6,000 

 
 136 
 
 THE TAXATION OF LAND VALUE 
 
 TABLE SHOWING THE INCREASE OF POPULATION IN 
 CERTAIN GERMAN CITIES 
 
 City 
 
 Berlin 
 
 Gelsenkirchen 
 Schoneberg. . 
 
 Bremen 
 
 Hamburg 
 
 Frankfurt 
 
 LUbeck 
 
 Population 
 
 1871 
 
 826,341 
 
 7,820 
 
 3,412 
 
 122,402 
 
 338,974 
 
 113,936 
 
 62,158 
 
 1910 
 
 2,070,695 
 169,530 
 140,992 
 298,736 
 
 1,015,707 
 414,598 
 116,533 
 
 Percentage 
 of increase 
 
 150.6 
 2068.0 
 4023.0 
 144.1 
 199.6 
 264.0 
 123.4 
 
 For our purpose the important fact to be noted is that 
 this development was accompanied by an even greater 
 appreciation in land value. For example, Dr. Mangoldt * 
 estimated that the rental of occupied land in the city of 
 Berlin had appreciated as follows: 
 
 1830 17 million marks 
 
 1840 38 " 
 
 1850 45 " 
 
 1860 229 " 
 
 1870 530 " 
 
 1880 1,042 " 
 
 1890 1,890 " 
 
 1898 2,118 " 
 
 Comparing the percentage of increase in rental in Berlin 
 from 1870 to 1898, with that of the growth of population 
 as shown in the table, it is as 285 per cent ^ to 150.6 per 
 cent. Or, take the statistics for Bavaria. The average rise 
 in the value of the land for the decade, from 1897 to 1907, 
 was estimated at 600 per cent for Bayreuth, 640 per cent 
 for Kaiserslautem, 976 per cent for Aschaffenberg, 1500 
 per cent for Behringserdorf, etc. For a longer period of 
 
 ' Die stddiische Bodenfrage, p. 31. 
 
 * Were the figures for 1910 available, the difference would be even 
 more striking.
 
 TAX ON VALUE INCREMENT IN GERMANY 137 
 
 time from 1867 to 1907 the average increases in land 
 value were as follows:* 
 
 Mosach 2307 per cent Landsbut 6737 per cent 
 
 Erlangen 2703 " " Fiirth 6566 " " 
 
 Bamberg 3200 " " NUmberg 6900 " " 
 
 WUrzberg 4900 " " Kaiserslautern 8900 " " 
 
 It is needless to multiply examples of this common phe- 
 nomenon dealt with so copiously in German Uterature. 
 From the seventies to the end of the century was the time 
 when peasants, in Roscher's phrase,^ were transformed 
 over-night into millionaires by virtue of their land owner- 
 ship. 
 
 This enormous growth in the value of the land has 
 brought in its train two so-called social ills; first, it has ag- 
 gravated the speculation in land; and secondly, it is held 
 responsible for the housing problem. Already in the sixties 
 and seventies speculation in urban land became active, en- 
 riching many even of those who had been bom serfs; in 
 these decades the "Millionenbauem" formed a distinct 
 social group.' The victory in 1871 and the economic 
 changes succeeding that year gave a new impetus to land 
 speculation. Realty and building companies were formed, 
 whose watered stock found purchasers on the stock ex- 
 change and whose purpose was by no means the develop- 
 ment of the urban communities.^ There are but few large 
 cities in Germany, it is asserted,^ whose building opera- 
 tions are not controlled by one or more building and realty 
 corporations (Terraingesellschaften). According to Adolph 
 Damaschke ^ there are seventy-three such corporations in 
 BerUn. They are generally comprised of speculators who 
 
 * Kommunales Jahrbuch (1909), vol. i, p. 661. 
 
 * Grundlagen der Naiixmalokonomie (1906 ed.), p. 261. 
 
 * Voigt, Grundrente und Wohnungafrage in Berlin und seinen Vororten, 
 p. 109. 
 
 * For their methods of operation see ibid., pp. 114 Jf. 
 
 * This is the position of the "Bodenreformer," but is maintained also 
 by a host of other writers. 
 
 * Jahrbuch der Bodenreform (1907), vol. in, p. 168.
 
 1S8 THE TAXATION OF LAND VALUE 
 
 make a specialty of erecting tenements (Mietkasemen) 
 in communities scarcely urban. For example, in Char- 
 lottenburg, Schoneberg, and other more recently settled 
 communities, apartment houses of immense size were 
 erected long before any need for them appeared. By this 
 method and in other ways, these corporations have suc- 
 ceeded in driving up the market price of land far beyond 
 what is warranted by the law of supply and demand.* 
 Recently, investigations public and private have revealed 
 serious unsanitary housing conditions and especially con- 
 ditions of overcrowding. One example must suffice hete. 
 In greater Berlin 600,000 people live in dwellings in which 
 each room is occupied by five or more persons.^ 
 
 Under these conditions the ethical justification of the 
 private appropriation of the " unearned increment " has been 
 questioned. With one group, indeed, the "Bodenreformer," 
 private property in land has been repudiated altogether; 
 with another group, the "Sozialpolitiker," such restriction 
 of urban land ownership has been sought as would enable 
 the community to share the "unearned increment." The 
 "justice" of this position is based on the fact that the com- 
 munity, with the concentration of population and its in- 
 creasing functions of government, not the individual owner, 
 creates the value increment; but also on the fact that social 
 expediency requires the restriction of ownership of urban 
 land. 
 
 8. This policy of restriction which the adoption of the 
 increment tax sanctioned marks no radical change in prin- 
 
 ^ Eberstadt, Die Spekidation im neuzeiilichen StSdtebau; Cf. also Ver- 
 handlungen des Vereins fiir Sozialpolitik in Niimberg (1911), in Schriften 
 deg Vereins fiir Sozialpolitik, vol. cxxxvin, p. 46. 
 
 ' Soziale Prams (1911-12), vol. xxi, p. 666. For other examples see 
 infra, chapter ix, pp. 390-91. In the light of this discussion the following 
 recent statement in the Chicago Daily Tribune (June 20, 1913, p. 16) is 
 interesting: "A severe collapse in the real estate and building markets 
 has been averted only by the concerted action of the banks. Overspecu- 
 lation in flat buildings in Berlin has left the city with 80,000 small flats 
 for which there are no tenants."
 
 TAX ON VALUE INCREMENT IN GERMANY 139 
 
 ciple. For the development of private property in land, 
 in Germany, bears the stamp of that "Sozialpolitik" 
 social regulation which since the organization of the 
 "Verein ftir Sozialpolitik" ^ has become the consciously 
 accepted state policy. It is true that with the break-up of 
 the feudal system and with the advent of the capitalistic 
 era, land became a commodity, subject to private owner- 
 ship, in Germany as elsewhere. There remained, neverthe- 
 less, a great deal of communal land, the property of the 
 states and communes. Especially in western and south- 
 western Germany, survivals of the old land system are to 
 be found, for example, in the Allmenden and Domanen 
 (the commons). 
 
 The state in which the public domain even yet plays a 
 great r61e is Baden, where the revenue from the land is 
 said to have exempted 121 rural communities from all tax- 
 ation.2 jt jg furthermore noteworthy that the largest cities 
 in Baden in the last two decades have sought to increase 
 their municipal holdings. In Mannheim, for instance, the 
 land owned by this city constituted, in 1870, 23 per cent 
 of the whole territory, in 1905, 36.8 per cent; in 1891, the 
 unimproved land owned by the community (excluding the 
 streets) was valued at about 22 million marks, in 1905, 
 at neariy 50 millions,' an increase of about 127 per cent. 
 The details of the city's growth cannot be entered into 
 here. Suffice it to say that from 1890 to 1906, the budget 
 had grown from 2,806,200 marks to 10,622,860 marks, and 
 that nearly sixty per cent of this amount was in 1906 cov- 
 ered by non-tax revenue.^ The other cities in Baden show 
 a slower but similar development with respect to their 
 land policy (Bodenpolitik). It is significant that the seven 
 
 * Organized at Eisenach in 1872, the "Verein fUr Sozialpolitik" has 
 exercised an unusually powerful influence on state legislation. 
 
 * Damaschke, Geschichte der NcUionaldkonomie (3 ed.), p- 363. 
 
 * Schriften dea Vereins fiir Sozialpolitik (1908), vol. cxxvi (Gemeiu- 
 definanzen), p. 140. 
 
 Ibid., p. 145.
 
 140 THE TAXATION OF LAND VALUE 
 
 largest cities are in possession of a net capital value of about 
 190 million marks, more than half of which comprises land 
 value. ^ 
 
 This "Bodenpolitik," moreover, is not peculiar to Baden 
 alone. Numerous German cities now vie with one another 
 in this policy.^ Many other cities draw a considerable 
 revenue from the public lands, and many have established 
 special funds to acquire more land.' Thus, it is very sig- 
 nificant that in the following cities more than twenty per 
 cent of the land is communal: 
 
 PERCENTAGE OF LAND (STREETS AND ROADS EXCEPTED) 
 WITHIN THE CITY UNDER PUBLIC OWNERSHIP* 
 
 Frankfurt a. M. . . .49. per cent Mannheim 32. 4 per cent 
 
 Stettin 45.5 " " Darmstadt 30.8 " " 
 
 Kiel 36.4 " " Ulm 24.7 " " 
 
 Aachen 36.0 " " Breslau 24.5 " " 
 
 Leipzig 32.7" " Stuttgart 23.2" " 
 
 Wiesbaden 32.4 " " Crefeld 21.0 " " 
 
 Magdeburg 22.6" " Hannover 20.7" " 
 
 Recklingshausen...22.5 " " Bielefeld 20.5 " " 
 
 The states also draw a considerable revenue from their 
 public lands, in pursuance of this policy. Prussia, for ex- 
 ample, in 1908, received a net profit of 92.27 million marks 
 from its forests, mines and other land.^ 
 
 Under the influence of this principle of "Sozialpolitik," 
 the legal restriction of land ownership has proceeded re- 
 cently in Germany to an extent which, from the stand- 
 point of the inviolability of private property rights, as con- 
 ceived of in Anglo-Saxon countries, appears revolutionary. 
 We refer to the law passed in 1902 with respect to the re- 
 
 * Schriften des Vereins fUr Sozialpolitik (1908), vol. cxxvi (Gemein- 
 definanzen), p. 150. 
 
 2 Soziale Praxis, vol. xvii, pp. 867, 1315; vol. xvm, pp. 957, 1373, et 
 passim. 
 
 * Statistisches Jahrbuch deutscher Stddte (1909), pp. 18, 19. 
 
 * Kommunales Jahrbuch (1909), vol. i, p. 550. The asterisk denotes 
 that the city has adopted the tax on value increment. 
 
 ' Statistisches Jahrbuch fiir den Preussischen Staai (1908), p. 225.
 
 TAX ON VALUE INCREMENT IN GERMANY 141 
 
 distribution (Umlegung) of property in Frankfurt a. M.* 
 In accordance with this law, it is possible to redistribute 
 property in districts predominantly undeveloped, in case 
 the public interest requires such readjustment, either in 
 opening up new building land or in laying out sites of suit- 
 able shape.'* The method by which this redistribution takes 
 place is noteworthy. All the land in question is massed 
 together, the land necessary for streets and squares is then 
 marked off, and the remainder is distributed among the 
 owners in portions proportionate to their interest in the 
 whole land; and compensation is paid for any loss incurred.' 
 
 In a country where private land ownership is subject 
 to restriction in so far as the pubUc welfare requires, the 
 introduction of the "Wertzuwachssteuer," whereby the 
 German government does not hesitate to recognize the 
 "unearned" character of the land-value increment,* is 
 consistent with the general policy of German "Boden- 
 politik." 
 
 9. Compared with the potency of the above-men- 
 tioned social principles on the enactment of the increment 
 tax, the influence of the principle of benefit in taxation, i.e., 
 that the tax is payment for services rendered by the state, 
 could be of but minor importance. The reason is clearly 
 because the system of local taxes in Germany as we have 
 shown ^ does not lend itself to that principle. Nevertheless, 
 in justifying the taxation of the "unearned increment," 
 German writers have from the first employed as argument 
 the fiscal principle of benefit. Already in 1866, Alexander 
 
 * Geseiz vom 28 Jvli 1902, betr. die Umlegung von Grundstiicken in 
 Frankfurt a. M. 
 
 2 IbU., 1. 
 JUd., 10. 
 
 * The imperial law declares that the tax is to fall on the unearned incre- 
 ment ("der ohne Zutun des Eigentlimers entstanden ist"). Reichs- 
 zuwachssteuergesetz vom H Februar 1911, 1. In this connection it is 
 interesting to point out that in the British Parliament the proposal to 
 call the increment unearned was promptly dismissed. 
 
 ' See suTpra, p. 122.
 
 142 THE TAXATION OF LAND VALUE 
 
 Meyer contended ^ that, more than in the case of other 
 commodities, the value of land was created and determined 
 by society and by the governmental expenditure for the 
 protection and improvement of property, adding that 
 "local taxes are the basis of the community, the community 
 the basis of remunerative labor, remunerative labor the 
 basis of high land value. Local taxes accrue to the land 
 owner to an ever increasing degree." Likewise Wagner and 
 Adickes defended the taxation of the "unearned increment " 
 on the ground that the landowner in the city had a special 
 advantage, the value of his land being the result of and 
 depending on the development of the state and the com- 
 munity.2 
 
 The influence of the principle of benefit or compensation 
 in taxation as an argument for the value-increment tax in 
 Germany can be further seen from the application, or elab- 
 oration, of the principle made by Koppe. He attempts 
 to justify the state and imperial taxes on value increment 
 as well as the local increment taxes on this ground. Thus, 
 admitting the effect of the services and expenditures of 
 the local government on the value of land, Koppe reasons 
 that without a powerful central government, i.e., the im- 
 perial government, this beneficent influence of the commune 
 on real property would be impossible. For, says he, all im- 
 perial legislation is equally a source of benefit to the land- 
 owner.' 
 
 It is, of course, evident that such an application of the 
 principle is untenable as the principle is generally inter- 
 preted. For it is only when the benefit between government 
 and subject is reciprocal, and at least roughly measurable, 
 
 1 Preussische Jahrbucher (1866), vol. xvm, p. 170. Cited by Adickes, 
 op. cit., p. 444. 
 
 * Verhandlungen des Vereins fiir Sozicdpolitik (1877), in Sckriften de 
 Vereins fiir Sozicdpolitik (1878), vol. xiv, p. 16. C/. Adickes, op. ci^., 
 pp. 444, 590, 618/. 
 
 " Das Schicksal der Reichszuwachssteuer," in Annalen des deutschen 
 Reicha (1910), vol. xliii, p. 670.
 
 TAX ON VALUE INCREMENT IN GERMANY 143 
 
 that the principle of benefit applies at all. That is why it 
 is considered applicable to local taxation, for here the in- 
 cidence of the tax is more easily determined (under the 
 English rating systems, for example), and the relation be- 
 tween certain services and local expenditure is more com- 
 mensurable than between the more general services and 
 expenditures of the state and imperial governments. Never- 
 theless, Koppe's attempt to justify the increment tax on 
 this principle is noteworthy. 
 
 As regards both the local and imperial increment taxes, 
 however, social causes operated more potently than the 
 fiscal principle of benefit in the enactment of the tax 
 measures. Additional factors which stimulated legislation 
 were the activity of the "Bodenreformer," and in case of the 
 imperial increment tax the fiscal exigency.^ 
 
 10. For popularizing the principles underlying the 
 increment tax, the propaganda of the "Bodenreformer" 
 (Single Taxers), since their organization in 1898, has ex- 
 erted a strong influence. That their organization came 
 later than in England and Australasia was due to the fact 
 that the needs mentioned above had not become acute, 
 or made themselves felt, earlier.^ The widespread influence 
 of the "Bodenreformer" may be gathered from the fact 
 that in 1910 the number of societies was 542, and the 
 membership about 750,000 persons,' Of course, the publi- 
 cations of the society, "Die Bodenreform," "Soziale 
 Fragen," and the quarterly, "Das Jahrbuch der Bodenre- 
 form," all under the efficient leadership of Adolph Dam- 
 aschke, undoubtedly reach a larger number of readers than 
 is represented by the membership. On the whole, the op- 
 portunism of the leaders has directed the energy of the 
 
 * See infra, 11. 
 
 * Of course, the movement to tax urban land value had started in the 
 seventies. Adolph Wagner may well be called the pioneer in that move- 
 ment; earlier and contemporaneous exponents were Herman Gossen, 
 Adolph Samter, Karl Arnd, FlUrscheim and Hertzka. 
 
 Soziale Praxis (1910-11), vol. xx, p. 188.
 
 144 THE TAXATION OF LAND VALUE 
 
 society to other reforms besides the tax on land value. 
 Thus, their activity has been extended to obtaining legis- 
 lation with reference to mines, hereditary building lease- 
 holds (Erbbaurecht), housing, and to colonization work, 
 etc. Then, too, their opportunism as regards the tax itself 
 has commended itself to persons who are not Single Taxers. 
 
 11. Already in 1894, under the direction of Adickes, 
 the mayor of Frankfurt a. M,, a bill was introduced in that 
 city to tax the value increment of land, but ten years 
 elapsed before the opposition to the measure was over- 
 come. In 1904, then, the ordinance was first passed in 
 Frankfurt.^ This started the ball rolling, for in the following 
 year Cologne and Gelsenkirchen adopted the tax. Then 
 followed in rapid succession, Essen (1906), Dortmund 
 (1906), Gross-Lichterfelde (1906), Pankow (1906), Weissen- 
 see (1906), Breslau (1907),Hessen (1907), Kiel (1907), Ham- 
 burg (1908), Berlin (1910), and a host of others. The num- 
 ber of local governments in Germany which had adopted 
 the tax before the enactment of the imperial tax was 652.^ 
 
 The history of the enactment of the "Reichszuwachs- 
 steuer" is enlightening. The fiscal stringency of the im- 
 perial government has received a great deal of attention 
 from German writers. In fact, the imperial government, 
 in 1909, had reached a serious stage of fiscal stress. The 
 growing budgets, it was felt, had to be met by other than 
 by additional income and excise taxes.^ The "Agrariar," 
 the reactionary party, were, of course, opposed to any 
 further property taxes. Indeed, so antagonistic were they 
 also to the revision of the inheritance tax,^ that from one of 
 
 ^ Although Frankfurt is generally regarded as the first city to intro- 
 duce the " Wertzuwachssteuer," several small communes in Saxony, 
 Oetzsch and Helbersdorf , are said to have taxed the value increment since 
 1902-03. Cf. Becher und Henneberg, Das Zuwachssteuergesetz torn IJ^ 
 Februar 1911, p. viii. 
 
 * Damaschke, Oeschichte der Naiionalokonomie (5th ed.), P- 649. 
 
 * Beusch, Die Reichsfinanzen und die Steuerreform, p. 117. 
 
 * The proposal was to make the tax fall on direct as well as on collateral 
 hdrs. CJ. Linschmann, Die Reichsfinanzreform von 1909, pp. 123-29.
 
 [TAX ON VALUE INCREMENT IN GERMANY 145 
 
 their own members on the Finance Committee came the 
 proposal of substituting the " Wertzuwachssteuer" on 
 securities (Wertpapiere) and land transfers for the pro- 
 posed revisions in the inheritance tax.^ After extended dis- 
 cussion in the committee the "Wertzuwachssteuer" was 
 rejected by the government, on the ground that the great 
 practical difficulties involved in the tax required a more 
 carefully prepared bill.^ Instead, a slight tax on land trans- 
 fers, one third of one per cent of the selling price, was im- 
 posed, while the partisans of the increment tax succeeded 
 in inserting in the same bill (" Reichsstempelgesetz," 1909) 
 the following provision: ' 
 
 " Before April 1, 1912, an imperial tax on the unearned 
 increment of land shall be enacted, which shall be so reg- 
 ulated as to produce an annual revenue of at least 20 mil- 
 lion marks. . . . The bill shall provide that to those local 
 governments where the increment tax was in force on 
 April 1, 1909, the average yield of the tax shall be turned 
 over for a period of not less than five years after the en- 
 forcement of the imperial tax. Such a bill shall be sub- 
 mitted to the Reichstag before April 1st, 1911." 
 
 In accordance with this provision the " Reichszuwachs- 
 steuer" was passed February 14, 1911. 
 
 It is important to note that with the enactment of the 
 imperial increment tax, the local and state taxes were re- 
 pealed, except in so far as the local bodies retained the op- 
 tion of levying additional rates to the imperial tax.* 
 
 * The Social Democrats accused the conservative proponents of 
 the increment tax, in preference to the inheritance tax, of selfish mo- 
 tives, since the increment tax would fall chiefly on urban landowners. 
 Cf. Koppe, "Das Schicksal der Reichszuwachssteuer " in Anna lendet 
 deutschen Reichs (1910), vol. XLm, p. 674. 
 
 * Cf. Koppe, op. cit., p. 673. 
 
 * Reichsstempelgesetz vom 15 Juli 1909, 70. 
 
 * Reichszuwachssteuergesetz vom 11 Februar 1911, 59. Cf. infra, 16. 
 By the amendment of the law in 1913, the revenue accruing from the 
 "Wertzuwachssteuer" was relegated entirely to the states and local au- 
 thorities. It is, therefore, an imperial tax in form only. Sea infra, 21.
 
 146 THE TAXATION OF LAND VALUE 
 
 12. Because of the suspension of the increment tax 
 laws for local and state purposes, we shall first analyze the 
 imperial law and then compare the same with the provi- 
 sions of the antecedent measures. The provisions of the 
 "Reichszuwachssteuergesetz" will be studied under the 
 following heads : 
 
 (1) The method of assessment and levy. 
 
 (2) The exemptions. 
 
 (3) The scale of rates. 
 
 (4) The division of the revenue among the imperial, 
 state, and local governments. 
 
 (5) The administration of the tax. 
 
 By far the most important provisions of the law and 
 those involving the most perplexing problems of theory and 
 practice are those relating to the object taxed and the 
 mode of assessment. " On the occasion of a transfer of land 
 lying within the country there shall be levied in accordance 
 with the provisions of this Act a tax on the value increment 
 which has accrued through no effort on the part of the 
 owner (der ohne Zutun des Eigentumers entstanden ist)." ^ 
 For practical purposes this criterion of the taxable object, 
 " unearned increment," is of no importance, since the Act 
 later defines specifically the method of assessment.^ The 
 section has, however, given rise to much legal controversy 
 involving the validity of the Act.' 
 
 "The difference between the previous purchase price 
 and the present selling price shall constitute the taxable 
 value increment." * In order that the tax may fall only on 
 the increment accruing from land value, not on improve- 
 ments, certain deductions from the price of the property are 
 stipulated. Thus, the amount of encumbrances assumed by 
 the seller, the cost of the machine equipment and other 
 
 * Reichszuwachssteuergesetz vom 19 Februar 1911, 1. 
 2 Ibid., 8-23. 
 
 * Cf. Amtliche Mitteilungen iiber die Zuwachssteuer, Jg. 1912, Nr. 8, 
 pp. 133, 200. 
 
 * Reichszuwachssteuergesetz, 8.
 
 TAX ON VALUE INCREMENT IN GERMANY 147 
 
 fixed capital, and also the value of the growing crops are 
 to be deducted from both the purchase and selling prices.* 
 But that is not all. All outlays for improvements and other 
 expenditures incurred on the taxable land must be taken 
 into account. Hence the previous purchase price and pres- 
 ent selling price must undergo the following modifications 
 before the taxable value can be computed: 
 
 (a) To the previous purchase price shall be added i^ 
 
 (1) Four per cent of the purchase price to cover outlays 
 incurred by the transaction of sale,' 
 
 (2) Expenditures for buildings, repairs, and other per- 
 manent improvements, including such as have to do with 
 agriculture and forestry; expenditures also for exploration 
 and permanent equipment in mining; * and five per cent 
 additional of the calculable value of these expenditures, or, 
 if the seller is a builder or a building workman and has 
 himself erected the buildings, fifteen per cent additional.'' 
 
 (3) Expenditures and special assessments for public 
 utilities and improvements incurred in the period of time 
 for which the tax is calculated. Interest shall be allowed, 
 calculated at four per cent of the expenditures for every 
 complete year of this period, not to exceed fifteen years.' 
 
 (4) Two and one-half per cent interest on the total 
 amount of the purchase price (i.e., the above additions, 
 (1), (2) and (G) included), so far as this amount does not 
 exceed 100 marks per are (100 square metres), or in case of 
 
 ^ Reichszuwachssteuergesetz, 10. * Ibid., 14. 
 
 * In case a higher commission was paid by the purchaser, the latter 
 amount shall be substituted. 
 
 * These expenditures have no reference to such as were noted under 
 fixed capital expenditures, nor serve for the current maintenance of 
 structures, nor for the current utilization of land, so far as the buildings 
 and improvements shall still exist. Moreover, if the expenditiu-es are cov- 
 ered by insurance they are not deductible. Ibid., 14 (3). 
 
 * This does not apply if the builder is a company, or association not 
 composed exclusively of building contractors or building workmen. 
 
 ' On demand of the seller, instead of this interest addition, there may 
 be substituted an amount equal to the addition under (4) or (5), etc 
 Ibid.. 14 (4).
 
 148 THE TAXATION OF LAND VALUE 
 
 vineyards 300 marks per are, for every year since the last 
 transfer of the property.^ 
 
 (5) Two per cent, in case of unimproved land, one and 
 one-half per cent, in case of improved land (for every year 
 since the last transfer of the property) of the differential 
 between the actual purchase price plus additions and the 
 calculated value in (4). If not more than five years have 
 elapsed since the last transfer, the addition in case of the 
 unimproved land shall be reduced by one-half. ^ 
 
 (6) In case the property had been acquired at a bankrupt 
 sale by the mortgagee, then the amount of his defaulted 
 claims or losses incurred by him may be added.' 
 
 (6) To ascertain the value increment, furthermore, there 
 shall be deducted from the present selling price: * 
 
 (1) The cost of sale and conveyance if incurred by seller 
 (the commission customary in the locality included). 
 
 (2) Upon demand of seller, that amount by which (for 
 every year since the last transfer but not for more than 
 fifteen consecutive years) the annual income from the land 
 can be showTi to have been less than three per cent of the 
 previous purchase price plus additions [(1), (2), and (6)] 
 noted above. 
 
 (c) Furthermore, to the selling price shall be added: '^ 
 
 (1) Any compensation paid the seller for any deprecia- 
 tion in the value of the land.^ 
 
 (2) The amount of the increment tax if the purchaser, 
 instead of the seller, had agreed in the contract of sale to 
 pay the tax.' 
 
 13. Before discussing the purpose of the additions and 
 reductions, a concrete illustration of the method of pro- 
 cedure in computing the taxable value will help elucidate 
 the complex system. Suppose a parcel of unimproved land, 
 
 ^ Reichszuwachssteuergesetz, 16 (1), * Ibid., 16. 
 
 Ibid., 14 (2). * Ibid., 22. IMd., 23. 
 
 23. Provided that the claim for such compensation has arisen 
 since January 1, 1911, and provided it is proved that the amount has not 
 been expended for the repair of the property. 
 
 ^ Ibid., 24.
 
 TAX ON VALUE INCREMENT IN GERMANY 149 
 
 10,800 arey was bought in 1893 for 1,000,000 marks. A 
 house worth 400,000 marks was constructed thereon, and 
 the property was sold, January, 1, 1913, for 2,600,000 
 marks. Suppose further that the income averaged 50,000 
 marks annually, except during 1906-10, when it averaged 
 only 30,000 marks. The method of ascertaining the amount 
 of increment tax is as follows: 
 
 (o) Previous purchase price 1,000,000 mk. 
 
 To which is added : ^ 
 
 (1)4 per cent of purchase price 40,000 mk. 
 
 (2) Cost of building 400,000 mk. 
 
 Plus 5 per cent interest 20,000 mk. 
 
 (3) (No expenditure made or special as- 
 
 sessment paid) 
 
 (4) 2j per cent for twenty years of the 
 
 value of the land calculated thus: 
 100 mk. X 10,800 are = 1,080,000 
 mk. 2 J per cent of 1,080,000 mk. .540,000 mk. 
 
 (5) li per cent for twenty years on (the 
 
 difference between 1,440,000 and 
 
 1,080,000 mk.) 360,000 mk 108,000 m k. 
 
 Total additions 1,108,000 m k. 
 
 Total purchase value 2,108,000 mk. 
 
 (6) Present selling price 2,600,000 mk. 
 
 From this sum shall be deducted: 
 
 (1) Cost of transaction 5,000 mk. 
 
 (2) Amount of deficit in income (1906- 
 
 10) for five years: 43,200 mk. (3 
 per cent of 1,440,000 mk.) 30,000 
 mk. = 13,200 mk. X 5 66,000 m k. 
 
 Total deductions 71,000 mk. 
 
 Selling price 2,529,000 mk. 
 
 \ Deducting total purchase price .2,108,000 mk. 
 
 Value increment (= 19.9 per 
 
 cent of total purchase price.) 421,000 mk. 
 
 Rate of tax ^ is 11 per cent. 
 
 Amount of tax 11 per cent of 421,000 mk. . . 46,310 mk. 
 
 Deductions ( 28, 2)* li per cent for twenty 
 
 years 13,893 mk. 
 
 Tax collectible 32,417 mk. 
 
 * The items correspond to the additions referred to in the preceding 
 section and are numbered as they were there. 
 ' See injra, 15, for explanation of rate and reduction.
 
 150 THE TAXATION OF LAND VALUE 
 
 Obviously the purpose of the allowances noted above is 
 to reach the "unearned increment" and to exempt any 
 increment in value which is attributable to the investment 
 of capital and labor. How, then, has this purpose suc- 
 ceeded? 
 
 First, as regards the additions to the original purchase 
 price, the expediency and equity of adding the various 
 sums of cost and compensation to the previous purchase 
 price or of deducting them from the seUing price gave rise 
 to much discussion in the Finance Committee.^ Before 
 pointing out the principles involved, it will be necessary to 
 show by a concrete example the difference in receipts which 
 the two methods produce. If, in the case assumed above, 
 the 1,108,000 marks expenditure and compensation were 
 substracted from the selling price, 2,529,000 marks, in- 
 stead of being added to the purchase price, the value incre- 
 ment would again be 421,000 marks, to be sure; ^ but, now, 
 the previous purchase price would be 1,000,000 marks, of 
 which 421,000 marks are 42.1 per cent. This change would 
 subject the value increment to a higher tax rate, twelve 
 per cent instead of eleven per cent in this case; hence the 
 revenue would be greater. Various writers have pointed 
 out that,' not alone for fiscal reasons, but likewise in ac- 
 cordance with the principles of the tax, the method fol- 
 lowed in the imperial law is reprehensible. The only prac- 
 tical way to ascertain the pure "unearned increment" 
 accruing from land is to deduct the value of the improve- 
 ments from the selling value of the property, allowing for 
 its depreciation; this the law does not do. Moreover, it 
 furnishes the speculator an escape from an otherwise heavy 
 burden, for in Germany the land speculator and building 
 
 * Cf. C. Miller, Reichsgesetz iiber die Zuwachssteuer, p. 40. 
 
 * As a matter of fact the value of the buildings at the time of sale 
 would probably be less than its original cost, and when deducted from 
 the selling price would make the value of the increment on which the 
 tax is chargeable still greater. 
 
 Cf. Boldt, Die Wertzuwachssteuer, p. 57; KSppe, op. cU., pp. 722/.
 
 TAX ON VALUE INCREMENT IN GERMANY 151 
 
 operator are in the main one and the same person. Thus 
 the "Terraingesellschaften" that erect the huge apart- 
 ment houses (Mietskasernen) to further their speculative 
 operations ^ could frustrate, in a measure, the purpose of 
 the tax. For, the excessive cost of the buildings when added 
 to the original purchase price of the land would lessen the 
 value increment on which the tax is payable. 
 
 Secondly, there is no provision in the Act to deduct any 
 depreciation in the value of the improvements which con- 
 stituted part of the original purchase price.'^ For example, 
 suppose a house and lot, valued respectively at 400,000 
 marks and 500,000 marks were sold in 1885, and sold 
 again in 1910 for 1,000,000 marks. Suppose the house had 
 deteriorated, was valueless, and was ready to be torn down. 
 What in such a case shall be considered the value incre- 
 ment, 100,000 marks or 500,000 marks? Under the im- 
 perial law the original purchase price is 900,000 marks and 
 the increment value only 100,000 marks. It is clear that in 
 accordance with the principle and definition of the tax on 
 land value, the value only of those improvements that are 
 unexhausted, and to the extent that a value still attaches 
 to them, shall be included in the original purchase price. 
 In this respect, although the question was discussed in the 
 Committee, the Committee granted the landowners a con- 
 cession, disregarding the principle involved. 
 
 Thirdly, the expediency and justice of some of the al- 
 lowances have been questioned. What is the "fair" in- 
 terest or compensation to be allowed the seller on his invest- 
 ment? The question cannot be answered absolutely; but 
 let us note the possible effect of the allowance under the 
 
 * See supra, 7. Cf. Voigt, op. cH. 
 
 ' Under the local systems, only that of Dortmund recognizes this 
 principle. The Dortmund ordinance provides that in case of brick 
 houses, which deteriorate quickly, three per cent of the expenditures for 
 the buildings shall be deducted, for depreciation. Cf. Boldt, Das Interesse 
 als Grundlage der Gemeindebesteuerung, in Schrifien des Vereina fiir Sozial' 
 jfolitik, vol. cxxvii, p. 119.
 
 152 THE TAXATION OF LAND VALUE 
 
 imperial law. An income of at least three per cent is as- 
 sured the owner of the property.^ Inasmuch as improved 
 land and even agricultural land, generally speaking, yields 
 a greater profit than three per cent, this provision favors 
 especially the owner of unimproved land and the speculator. 
 As Koppe points out,^ for holding a parcel of land worth 
 100,000 marks out of use for a period of fifteen years (land 
 which yields no income), a reduction of 45,000 marks ^ will 
 be made from the selling price, thus reducing the amount 
 of the tax. And, inasmuch as income bears the greatest 
 burden of taxation in Germany, this same owner of vacant 
 land is subjected to the least taxation; hence speculation 
 in vacant land, in spite of the increment tax, is profit- 
 able and is furthered. Again, it is noteworthy that in al- 
 lowing two and one-half per cent interest in case of agri- 
 cultural land, and two per cent of the excess ^ (if more than 
 five years have elapsed since the last transfer of the land) 
 in case of unimproved land, and one and one-half per cent 
 in case of improved land, the vacant land held for a long 
 period has the advantage over the improved land. The 
 expediency also of allowing five per cent interest on the cost 
 of the permanent improvements, as compensation for di- 
 recting and overseeing these improvements has been ques- 
 tioned. In case the owner is himself the builder, there is 
 some reason for compensating him, but not to fifteen per 
 cent of the expenditure. 
 
 Such, then, are some of the diflBculties encountered in 
 attempting to ascertain the "unearned increment" accru- 
 ing from land. 
 
 14. That the taxation of value increment is not ruth- 
 lessly carried out is furthermore evident from an examina- 
 tion of the exemptions. Improved land whose selling price 
 is not above 20,000 marks and unimproved land not ex- 
 
 1 Keppe, op. cit., p. 726. Ibid. 
 
 Three per cent of 100,000 marks X 15. 
 * Cf. supra, pp. 147-48.
 
 TAX ON VALUE INCREMENT IN GERMANY 153 
 
 ceeding 5,000 marks are exempted from the tax.^ But the 
 exemption is allowed only in case the income of the hus- 
 band and wife had not exceeded 2000 marks the year previ- 
 ous to the sale of their property, and provided neither was 
 engaged in realty operations as a business. ^ Transfers of 
 land by inheritance or gift are not subject to the increment 
 tax,' unless the latter form of transfer is to evade the pay- 
 ment of the tax. It is necessary to point out here that 
 properties exchanged between owners are taxable, each 
 parcel of property being separately assessed and taxed.* 
 An important provision is that which makes the transfer 
 of rights in the property of partnerships and companies * 
 liable to increment tax, so far as the property is composed 
 of land, and the utilization of the land is one of the objects 
 of the company, or if the company has been formed to 
 evade the tax. 
 
 Other exemptions under the Act are: 
 
 (1) The sovereigns of the separate states (der Landes- 
 flirst und die Landesfiirstin). 
 
 (2) The imperial government. 
 
 (3) The states and conmaimes within whose jurisdiction 
 the land is located. 
 
 (4) Societies of all sorts which are not profit-making, 
 for example, charitable institutions, internal colonization, 
 loan and building societies in the interest of the poorer 
 
 * Reichszuwachasteuergesetz, 1. " Unimproved land shallinclude also 
 land upon which there are gardenhouses, sheds, lumber and coal yards, 
 and similar structures serving temporary purposes." 
 
 ' It is noteworthy that no minimum exemption, such as is found in 
 the local Acts is allowed under the imperial Act. In Frankfurt a. M., it 
 will be recalled, a value increment of less than fifteen per cent of the pur- 
 chase price is exempted. For changes in the provision see infra, 21. 
 
 Reichszuwachssteuergesetz, 7 (1). Such property is subject to taxa- 
 tion imder the "Reichserbschaftssteuergesetz" of June 3, 1906. It will 
 be remembered also that such exchanges are not taxable imder most of 
 the " Umsatzsteuem " in Prussia. 
 
 * Ibid., 26, 
 
 ^ Ibid., 3. This does not apply to corporations (Aktiengesellschaften). 
 
 Ibid., 30.
 
 154 THE TAXATION OF LAND VALUE 
 
 classes, provided the dividends distributed do not exceed 
 four per cent of the invested capitaL ^ 
 
 (5) Property owned jointly by married persons, in case 
 of the establishing, altering, continuing, or dissolving of 
 such ownership.^ 
 
 (6) Property acquired through contracts concluded be- 
 tween co-heirs for the purpose of dividing an estate, or ac- 
 quired by purchase at auction for the same purpose.' 
 
 (7) Property acquired by descendants from parents, 
 grandparents, and more distant progenitors. 
 
 (8) Property acquired by a company composed exclu- 
 sively of the seller and his descendants.* 
 
 (9) Parcels of land exchanged for purposes of rearrange- 
 ment or redistribution (Zusammenlegung und Umlegung) 
 by the public authority; or in exercising the right of emi- 
 nent domain in respect to forest land. 
 
 (10) Mineral land, in case of an exchange of parts of 
 fields between adjoining mines, and in case of a merger for 
 the purpose of the better working of the mines, but not if 
 the merger is effected to evade the tax. 
 
 (11) Mortgages in bankrupt sales, to the value of the 
 mortgages.^ 
 
 (12) An increment tax which does not exceed twenty 
 marks in amount.^ 
 
 The purposes of these exemptions are clearly: (1) to 
 guard against appropriating an increment attributable to 
 labor or capital invested, as the increment accruing to the 
 small owner is likely to be; and (2) not to interfere with ex- 
 changes and the acquisition of property that take place for 
 other reasons than profit-making as in the case of sale. As 
 
 * The Bundesrat is empowered to exempt such societies even if the 
 dividends are at most five per cent. 
 
 * Reichszuwachssteuergesetz, 7 (2). * Ihid., 7 (3). 
 
 * Ibid., 7 (5). "The obligation to pay a tax shall arise if subsequently 
 the company is made to include a member who is not a descendant of 
 the seller." 
 
 , 6 Ibid., 14 (2). Ihid., 28.
 
 TAX ON VALUE INCREMENT IN GERMANY 155 
 
 the tax is an indirect levy, it is reasoned, the tax for this 
 exempted property is merely postponed to such time as it 
 will be sold. 
 
 15. The next important consideration in the analysis 
 of the imperial tax is the progressive scale of rates. The 
 principle of progressive taxation seems well estabUshed in 
 Germany. It is recognized in the levy of the income and 
 inheritance taxes as well as in the increment tax, and is 
 consistent with their predilection for the faculty principle 
 in taxation. In the following'table the progressive sched- 
 ule of rates for the increment tax is shown : ^ 
 
 10 per cent tax, if the increment does not exceed 10 per cent of the 
 
 purchase price 
 
 11 per cent tax, if the increment is between 10-30 per cent inclusive 
 
 12 " " " " " 
 
 lO << << M 
 
 14 " " 
 
 15 " " " " " 
 10 << << << 
 
 17 " " " " " 
 
 18 " " " " " 
 
 19 " " " " " 
 
 20 " ' " 
 
 81 " " " " " 
 
 aa '* " " " 
 
 23 " " " " " 
 
 24 " " " " " 
 
 25 " " " " " 
 
 26 ' " " 
 
 27 " " " " " 
 
 28 " " " " " 
 
 29 " " " " " 
 
 30 " " " " " 
 
 " " " 
 
 30-50 
 
 " " " 
 
 50-70 
 
 <4 
 
 70-90 
 
 
 
 90-110 
 
 
 
 110-130 
 
 
 
 130-150 
 
 It 
 
 150-170 
 
 C< 
 
 170-190 
 
 4< 
 
 190-200 
 
 (4 44 44 
 
 200-210 
 
 44 44 44 
 
 210-220 
 
 44 44 44 
 
 220-230 
 
 44 44 44 
 
 230-240 
 
 44 44 44 
 
 240-250 
 
 44 44 44 
 
 250-260 
 
 44 44 44 
 
 260-270 
 
 44 44 44 
 
 270-280 
 
 44 44 44 
 
 280-290 
 
 " exceeds 
 
 290 
 
 Thus, for example, the tax is ten per cent of the value of 
 the increment, when the increment does not exceed ten 
 per cent of the previous purchase price. Under purchase 
 price, it will be remembered, the additions, comprising 
 compensation and expenditure, are included.^ 
 
 Furthermore, it is provided that for every full year since 
 the date of the previous purchase, the tax shall be reduced 
 by one per cent of its amount. But if the land has been 
 
 * Reichszuwachssteuergesetz, 28. * See supra, pp. 147 ff.
 
 156 THE TAXATION OF LAND VALUE 
 
 acquired prior to January 1, 1900, the rebate shall be in- 
 creased to one and one-half per cent annually from the time 
 of the purchase until January 1, 1911.^ For example, as- 
 sume that the tax is 2300 marks, the date of purchase 1902, 
 the date of sale 1912, then ten per cent (one per cent for 
 ten years) is to be deducted, leaving 2070 marks payable; 
 now, had the date of the previous purchase been 1891, the 
 deduction would have been thirty per cent (one and one- 
 half per cent for twenty years) leaving as tax 1610 marks. 
 
 This scale of rates and the reductions were adopted out 
 of a number submitted to the Finance Committee, ^ the 
 controversy being centered chiefly on the reductions. Al- 
 ready in some of the local measures,' a difference in the 
 amount of tax chargeable was made, based upon the length 
 of ownership. The longer the period of ownership, the 
 smaller the amount of tax. This practice, although it 
 favors such property as that of the " Millionenbauern " 
 (the millionaire peasants), a class whose wealth is clearly 
 "unearned," has been justified on the following grounds: 
 First, it is assumed that persons who hold their land for a 
 long period of time have not speculative motives in view. 
 Secondly, the person who has reaped a fortune in a short 
 period of time is better able to share it with the govern- 
 ment than one who has waited a long time for such gain 
 and has worked the land for a livelihood.* Thirdly, it is a 
 means of compensating for a change in the value of money, 
 through a long period of time, since no accoimt of such 
 change is taken in computing the taxable increment. Curi- 
 ously, however, this assumes a falling value of the stand- 
 ard, and would not apply for a period of a rising value. 
 
 In connection with the above problems involved in dis- 
 
 * Reichszuwachssietiergesetz, 28. 
 Cf. Koppe, op. cit., pp. 728-80. 
 
 * See infra, 19. 
 
 * To be consistent with this argument a distinction should have been 
 drawn between improved and unimproved land. Such a distinction is 
 made in some of the local laws.
 
 TAX ON VALUE INCREMENT IN GERMANY 157 
 
 tributing the burden of the increment tax equitably, the 
 retroactive character of the imperial tax needs considera- 
 tion. The previous occasion from which the purchase price 
 is determined, under the imperial law, antedates the enact- 
 ment of the law; hence the value increment which had ac- 
 crued prior to the Act is taxable. But it is also provided * 
 that, (1) in case the previous purchase took place forty 
 years before the occasion of paying increment tax, the 
 value which the property had forty years before such oc- 
 casion shall be substituted for the previous purchase price, 
 unless the person liable for the tax shall prove that the 
 previous purchase price had a greater value than on the 
 assumed arbitrary date; (2) in case the previous purchase 
 price antedated January 1, 1885, the value which the land 
 had on that day shall be substituted for the purchase price, 
 unless the taxpayer shall prove that he paid a higher price 
 than the land was worth on January 1, 1885. 
 
 It will be noted: (1) From the fiscal standpoint, the re- 
 troactive feature of the tax is more expedient than if only 
 the future value increment were taxed. (2) By limiting the 
 period to forty years, property held under long tenure is 
 favored for reasons discussed above. (3) The arbitrary 
 previous purchase value is a fictitious one, to be estimated 
 " nach dem gemeinen Wert "; ^ that is, according to "the 
 selling or capital value, determined by the price which 
 would be realized in customary business transactions ac- 
 cording to the condition of the salable property, and irre- 
 spective of any unusual or solely personal considerations." 
 (4) The expediency of fixing January 1, 1885, has been 
 questioned; first, because land had appreciated greatly 
 before 1885, and there is no reason why the value incre- 
 ment which accrued before that date should not be equally 
 subject to the tax; secondly, because it is more diflScult to 
 ascertain the value of the land for 1885 than it would be 
 
 * Reichszuwachssteuergesctz, 17. 
 
 * Zuwachssteuer Ausfuhrungsbestimmungen (1911), 22.
 
 158 THE TAXATION OF LAND VALUE 
 
 for such a date as 1870, for example,^ when land, generally 
 speaking, had an agricultural value merely. 
 
 16. In view of the fact that the scale of rates under the 
 imperial law is different and in some cases lower than under 
 the local systems, the consideration of the suspension of 
 the local and state laws is important. With the enforce- 
 ment of the imperial law, on January 1, 1911,^ the statutes 
 of the states and of the local bodies relative to the increment 
 tax became null and void, except in special cases where the 
 local tax might continue to be levied until April 1, 1915.' 
 That the revenue accruing to the local bodies from the in- 
 crement tax might be assured, however, the following allo- 
 cation of the revenue among the several governing bodies 
 was made. Of the proceeds of the "Reichszuwachssteuer" 
 fifty per cent was to accrue to the federal government, ten 
 per cent to the states in payment for the administration 
 and levy of the tax, and the remaining forty per cent to the 
 local bodies in whose jurisdiction the land subject to the 
 tax was located. In case of any community where the tax 
 had been in force before January 1, 1911, and whose aver- 
 age revenue from the tax had exceeded the quota now 
 assigned to it by the imperial government, the imperial 
 government was to pay such community the difference 
 until April 1, 1915.'* Instead of paying this difference in 
 the manner described, however, the communities might 
 continue to levy their own tax, subject to the regulations 
 of the Chancellor, until April 1, 1915, provided the same 
 average amount was raised by the local government as 
 before April 1, 1911, any excess going to the central gov- 
 ernment. The determination of the average yield was to 
 be made by the "Bundesrat" (imperial federal council). 
 
 * Some of the local laws, e.g., in Essen, make this date the limit of 
 the retroaction. 
 
 * The law went into effect on April 1, 1911, but with retroactive force 
 from January 1, 1911. See Reichazuwachssteuergesetz, 72, 62. For 
 amendments see infra, 21. 
 
 * The exception is discussed in this section. 
 
 * Reichszuwachssteuergesetz, 58, 60.
 
 TAX ON VALUE INCREMENT IN GERMANY 159 
 
 The local governments may, moreover, with the permis- 
 sion of the state government (Landesregierung) levy a rate 
 supplementary to the imperial increment tax, the revenue 
 of which accrues to the community. This additional tax 
 shall be a percentage rate not to exceed one hundred per 
 cent of the revenue of the subvention. Furthermore, the 
 supplementary rate together with the imperial tax shall not 
 exceed thirty per cent of the value increment.^ As regards 
 the levy of this supplementary rate, the local authorities 
 are empowered to determine the system of taxation with 
 respect to the kind of land, and the length of ownership. 
 To this extent, then, the local systems, imtil the law was 
 amended, existed side by side with the imperial system. 
 
 The expediency of an imperial tax on value increment 
 versus the local taxes was at the time of the enactment 
 of the "Reichszuwachssteuer" an open question. Even 
 though the localities had not been put at a disadvantage 
 fiscally by the imperial enactment, authorities were not 
 agreed as to the e^ediency of the policy in general. On 
 the one hand, some tax oflBcials saw a better administra- 
 tion under the imperial system,* based on the general ad- 
 vantage of uniformity. According to Dr. Boldt, the com- 
 munities in which the landowners were most influential had 
 the mildest ordinances, whereas the manufacturing cities, 
 as Gelsenkirchen and Heme, for example, had succeeded 
 in introducing satisfactory, effective measures. From this 
 standpoint, then, the imperial law would make the sys- 
 tems uniform, would remove the tax from local political 
 influences, and would prevent the loss of revenue through 
 unfavorable litigation.^ The progressive form of the tax, 
 too, would lend itself better to an imperial rather than to 
 a local tax. 
 
 On the other hand, the partisans of local autonomy be- 
 
 ^ Retchszuwachssteuergesetz, 59. 
 
 * " Verhandlungen des Vereins fUr Sozialpolitik, " in Sckriften des Ver- 
 eins, vol. cxxxviii, pp. 4i2-4S. 
 Ibid., pp. 43, 62.
 
 160 THE TAXATION OF LAND VALUE 
 
 lieved that, like all taxes on realty, the increment tax 
 should be levied by the locality and in the interest of the 
 locality in which the property is situated. Thus Professor 
 Eheberg ^ said, " I would have much preferred to see the 
 tax in the hands of the localities rather than in those of the 
 imperial government, because the relationship between 
 land-value increments and local fiscal policy is surely more 
 evident and simpler than that between the appreciation in 
 land value and imperial taxation." That is, inasmuch as 
 the community gives rise to the great appreciation in land 
 value through its public improvements and industrial 
 development, it should be the recipient of this socially 
 created value. To this the further argument is added, that 
 the local officials can best administer the tax, and that, 
 on account of the complexities involved in the imperial 
 system, the expenses of administration will, for a while at 
 any rate, exceed those incurred by the locaUties in the 
 collection of the tax.^ 
 
 Judging from the amendment of the law in 1913, and 
 from the operation of the imperial increment tax during 
 two years, we can now draw definite conclusions with regard 
 to the relative expediency of the German imperial and 
 local value-increment taxes. The causes of the relegation 
 of the tax to the local bodies will be discussed below.' 
 
 17. The ten per cent of the receipts from the tax that 
 is turned over to the state governments is compensation 
 for the administration of the increment tax. These gov- 
 ernments shall establish offices for that purpose.* The 
 administration of the tax is simple. The seller, purchaser, or 
 other interested person shall report any transfer of land to 
 the delegated tax authority within one month of such 
 transfer. Though each one of the interested persons is 
 under obligation to give notice of the transaction, not more 
 
 * " Verhandlungen des Vereins fiir Sozialpolitik," in Schriften de 
 Vereins, vol. cxxxvin, p. 72. (Translated.) 
 
 Ibid., p. 54. Infra, 21. 
 
 * Reichszuwachssteuergesetz vom H Februar 1911, 35.
 
 TAX ON VALUE INCREMENT IN GERMANY 161 
 
 than one such notice is required; nor is such notification 
 necessary, if within the month, a declaration before a court 
 or a registration of the transfer in the "Grundbuch" 
 (Domesday Book) is made. In case of property held in 
 joint ownership which is transferred to a part owner of the 
 company, no tax is chargeable. But on the next occasion of 
 transfer, the whole increment accruing since the last tax- 
 able occasion before the separation of ownership shall be 
 liable for tax. ^ The seller or sellers shall be held Uable for 
 the tax; but if the tax cannot be collected from the seller, 
 the purchaser shall be liable to the amoimt of two per cent 
 of the selling price of the property. ^ The fee of the realty 
 agent is taxable, and such agent is liable, jointly and sever- 
 ally with the seller, for such fee. In case a transaction, on 
 which tax has been paid, has been revoked, the amount of 
 the tax shall be returned; or, in case of a reduction in the 
 selling price, the tax shall be correspondingly reduced and 
 the excess refunded.' If the land is transferred back to the 
 previous owner within two years after the sale, the tax 
 must be refunded, subject to the regulations prescribed 
 by the Bundesrat. In such case, of course, it shall be con- 
 sidered that no sale has occurred. 
 
 Information shall be furnished the tax authorities by:* 
 (1) registries of deeds (Grundbuchamter) concerning all 
 recorded transfers of property; (2) by the registry courts 
 and authorities (Registerberichte-und-behorden) concern- 
 ing the registration of transfers; (3) by the authorities 
 and oflScials, imperial, state, and local, and notaries con- 
 cerning all legal transactions regarding the transfer of 
 property, and concerning previous collections of tax; (4) 
 by other bodies, upon the demand of the state governments 
 with the consent of the Chancellor. 
 
 Upon the demand of the tax authority and within a 
 period of time named by that authority, the seller who has 
 
 * Reichszutoachsateuergesetz vom H Februar 1911, 25. 
 
 Ibid., 29. Ilnd., 82, 33, 34. Ibid., 38.
 
 162 THE TAXATION OF LAND VALUE 
 
 given notice of the transaction is called upon to make a tax 
 declaration. Objections to the declared valuation may be 
 made by the authority, and if the required changes are not 
 made by the taxpayer within the period of time allowed, 
 the tax authority may make the assessment and collect the 
 tax accordingly. The cost of the valuation must be borne 
 by the taxpayer, in case the tax based on the assessed value 
 exceeds by one-third the amount based on the declara- 
 tion.^ The ordinary process of assessment does not in- 
 volve the payment of fees or stamp dues by the taxpayer. ^ 
 If the immediate collection of the tax will entail undue hard- 
 ship, a delay may be granted, or payment by installments 
 may be permitted, subject to the regulations of the Bundes- 
 rat. In such cases security may be required, and when the 
 conditions which occasioned the special treatment have 
 ceased to exist, the privilege is withdrawn. 
 
 Objections to the assessment may be made in writing 
 within a month after the notice of the assessment has been 
 served. The complaint must state the court before which, 
 and the time within which, the appeal shall be made. The 
 proceedings are subject to the regulation of the Bun- 
 desrat.' 
 
 Regarding the penalties with respect to violations of the 
 requirements of the law, the taxpayer is subject to a fine, 
 not to exceed four times the amount of the tax, if he fails to 
 give notice of a transfer of property, or to make declara- 
 tion, or if he knowingly makes false returns. He is given a 
 period within which he may retract his statement before 
 penalty is applied.* If it shall appear that the false state- 
 ment or failure to make the necessary returns was not 
 made with the purpose to defraud, a fine not exceeding 600 
 marks may be substituted for the fine mentioned above. 
 For other violations of the provisions, a fine not exceeding 
 150 marks may be imposed. In case of companies and cor- 
 
 * Reichszuwachssteuergesetz vom H Februar 1911, 39, 40, 43. 
 im., 56. lUi., 44, 45. * Ibid., % 60.
 
 TAX ON VALUE INCREMENT IN GERMANY 16S 
 
 porations, the representatives, managers, or directors shall 
 be liable for the fine in fuU,^ It is further provided that, if 
 the owner is a German, his property shall not, without his 
 consent, be sold at auction in order to collect the increment 
 tax; nor shall an owner be imprisoned for failure to pay a 
 fine.^ The right to an increment tax shall lapse after ten 
 years.' 
 
 In general, the administration of the tax is obviously 
 simple. The assessment becomes largely a matter of regis- 
 tration of sales and of mathematical computation of the 
 tax.* But while it obviates very largely the need of expert 
 valuers such as the Australasian and English systems 
 require, the difficulties of computation of the value in- 
 crement and the litigation which the law of 1911 has 
 occasioned, have enhanced the cost of administration 
 inordinately in proportion to the yield of the tax. 
 
 18. The provisions of the imperial law analyzed in the 
 preceding sections were in the main modelled after those 
 contained in the local ordinances. But there are great dif- 
 ferences in method in the various local measures; and these 
 deserve consideration, because the efficacy of the increment 
 tax depends largely on the methods of assessment, on the 
 rates, and on the exemptions. Regarding the allowances for 
 interest, for expenditures and other compensation in ascer- 
 taining the value increment, a great variety of procedure 
 exists. For example, the state tax of Saxony was made 
 applicable to unimproved land only, because the difficulties 
 of measuring the " unearned increment" accruing from im- 
 proved land seemed insuperable.^ What constitutes a 
 "fair" interest, what a "just" allowance for expenditures 
 incurred are questions variously answered in the different 
 
 * Reichszuwachsateuergesetz vom 1^ Februar 1911, 51, 53, 54. 
 lUd., 49, 65. Ibid., 57. 
 
 * The diflBculties involved in the assessment are chiefly those con- 
 nected with the interpretation and legality of the provisions. C/. infrOf 
 22. 
 
 * C/. Schriften des Vereinsfur Sozialpolitik, vol. cxxvi, p. 272.
 
 164 THE TAXATION OF LAND VALUE 
 
 laws. For example, Gottingen allows ten per cent of the 
 purchase price to be added as compensation for expendi- 
 tures and another ten per cent for depreciation in case the 
 land has not changed hands in ten or more years; Frank- 
 furt a. M., Cologne, Breslau grant an allowance of five per 
 cent for outlays; Tegel, Weissensee, Emden, Aschenleben 
 allow five per cent when the land is improved, three per cent 
 when unimproved. Again, the rate of interest (not com- 
 pounded) allowed for the earnings on the invested capital 
 is not uniform. Frankfurt and Cologne provide for a four 
 per cent allowance for each year of ownership in the case of 
 unimproved land; Gelsenkirchen only two per cent, but for 
 a period of ownership not exceeding twenty years; ^ Bre- 
 men and Hamburg make no allowance for interest. The 
 expediency from both the fiscal and social standpoints of 
 allowing no interest especially in case of unimproved land 
 has been maintained by Dr. Boldt,^ who argues that the 
 less compensation allowed for, the greater the revenue and 
 the more effective the check on land speculation. The impe- 
 rial law, as we have seen, follows the other system which 
 in turn is defensible on the principle of equity in taxation. 
 
 In most of the local measures, these allowances includ- 
 ing expenditures are added to the previous purchase price. 
 In Gelsenkirchen and Minden, however, they are deducted 
 from the selling price. The latter method makes the tax 
 more productive and accords with the principle of taxing 
 the " unearned increment.'* 
 
 In respect to the retroactive feature of the tax, the pro- 
 visions in the local ordinances can be summarized under 
 four general principles. First, the tax is to be moderately 
 retrospective, probably, with the object in view to tax only 
 speculative value increments which are thought not to ac- 
 company long tenure. In accordance with this principle, 
 
 * Cf. Schriften des Vereins fur Sozialpolitik, vol. cxxvn, p. 120. 
 
 * Die Wertzuwachssteuer. Dr. Boldt would limit the allowance f< 
 interest to a short period, e.g., five years. CJ. ibid., p. 61.
 
 TAX ON VALUE INCREMENT IN GERMANY 165 
 
 Frankfurt levies the increment tax only on land which has 
 changed hands within the preceding twenty years. ^ Kiel 
 and Breslau have hkewise "moderately retroactive" reg- 
 ulations, the "original site" limit being computed from 
 April 1, 1900, and January 1, 1895, respectively. Secondly, 
 there are some cities that believe the community is en- 
 titled to a share of the value increment from the day of the 
 previous purchase. They accordingly fix no limit, seeking 
 the actual purchase price in every case. Liegnitz, Hamburg, 
 Weissensee are examples of this category. Thirdly, by set- 
 ting the limit to 1860 and 1871, respectively, Dortmund and 
 Essen do not in practice depart from the second principle, 
 for the land before 1871, for the most part, had only an ag- 
 ricultural value. The restriction, therefore, is only nom- 
 inal. Fourthly, altogether opposed to retroactive taxation 
 are Cologne and Gross-Lichterfelde, for example. These 
 cities proposed to tax only the increment which should have 
 accrued since the enactment of their laws. Aside from the 
 loss of revenue which this system occasions, it necessitates 
 a valuation of all the land at the time the law is passed. 
 Such a valuation is expensive and gives rise to a great 
 amount of litigation.* In fixing January 1, 1885, therefore, 
 as the limit of retroaction, the imperial law followed a mid- 
 dle course; the result of which, according to some authori- 
 ties, will be less revenue and greater difficulty arising from 
 valuing land from an arbitrary date.' 
 
 19. More important criteria even of the efficacy of the 
 increment taxes are the rates, the exemptions, and the re- 
 bates allowed on the basis of length of ownership and the 
 kind of land, whether improved or unimproved. The dif- 
 
 * We have seen that in case of longer tenure the land is subject only to 
 the "Umsatzsteuer." CJ. supra, 6. 
 
 * A great deal of litigation, where the previous piurchase price is taken 
 as the value, is obviated because the custom of recording land transfers 
 and the prices in the "Gnindbuch" is general throughout Germany. 
 
 * A considerable number of lawsuits have been brought already on ac- 
 count of the valuation "nach dem gemeinen Wert." Cf. AmUiche Mittei- 
 lungen iiber die Zuwachssteuer (1912), Nr. 11, pp. 184-85.
 
 166 
 
 THE TAXATION OF LAND VALUE 
 
 ferences in the scales of rates in the local statutes are 
 noteworthy. From the following table a comparison of 
 the rates can be made. First, we note that unless an 
 
 TABLE SHOWING MINIMUM INCREMENT EXEMPTION, 
 RATE OF PROGRESSION, AND RATE OF TAX IN 
 CERTAIN OF THE LOCAL SYSTEMS ^ 
 
 CUy 
 
 Cologne 
 
 Fraakfurt a. M 
 
 Dortmund 
 
 Essen 
 
 Linden 
 
 Kreuznach 
 
 Marburg 
 
 Pankow 
 
 Weissensee. . . . 
 Lichterfelde . . . 
 Zehlendorf . . . . 
 Reinickendorf . , 
 
 Berlin 
 
 Jena 
 
 Markanstadt. . 
 
 Minimum 
 incremeni 
 
 exempt 
 
 {per cent of 
 
 purchase 
 
 price) 
 
 10 
 15 
 10 
 20 
 10 
 10 
 10 
 10 
 10 
 10 
 10 
 10 
 10 
 10 
 10 
 
 Rate of pro- 
 gression (as 
 incremeni 
 progresses, 
 rate increases 
 by 1 per cent) 
 {per cent of 
 purchase 
 price) 
 
 10 (10-20) 
 5 (15-20) 
 
 10 and 5 
 
 10 
 
 10 
 
 30 (10-40) 
 5 
 
 10 
 
 10 
 
 10 
 
 10 
 
 10 and 25 
 
 10 
 5 
 
 10 
 
 Rates 
 
 Mini- 
 mum 
 {per 
 cent) 
 
 10 
 2 
 3 
 3 
 3 
 3 
 3 
 5 
 5 
 
 10 
 5 
 2 
 5 
 5 
 1 
 
 Maxi- 
 mum 
 {per 
 cent) 
 
 is 
 
 25 
 15 
 15 
 17 
 
 8 
 15 
 20 
 20 
 25 
 20 
 
 8 
 20 
 25 
 20 
 
 increment exceeding a certain minimum percentage (ten 
 per cent of the purchase price in most of the measures) 
 accrues, no tax is collectible. Secondly, bearing in mind 
 that the rate of tax increases by one per cent for every ad- 
 ditional five, ten, and sometimes thirty per cent of the pur- 
 chase price (as shown in column S), it becomes evident 
 that the smaller the rate of progression the larger the 
 revenue, other things being the same; thus compare the 
 rates in Dortmund and Kreuznach, both of whose scales 
 , Boldt, op. cit., pp. 80-81.
 
 TAX ON VALUE INCREMENT IN GERMANY 167 
 
 begin with a minimum rate of three per cent, yet whose 
 revenue will vary because of the different rates of pro- 
 gression. The discrepancy will be seen from the follow- 
 ing: 
 
 KREUZNACH DORTMUND 
 
 S% when increment is 10- 40% 3% when increment is 10-20% 
 
 4" " " " 40-70" 4" " " "20-30" 
 
 5 " " " " 70-100 " 5 " " " " 30-40 " 
 
 6 " " " " 100-130 " 6 " " " " 40-50 " 
 
 7 " " " " 130-160 " 7 " " " " 50-60 " 
 
 8" " " "160-190" 8" " " "60-70" 
 
 Taking all the different factors into consideration, the 
 highest scale of rates in the cities considered in the table is 
 that of Cologne and Lichterfelde.^ 
 
 Comparing the rates under the imperial tax with those 
 in the table above, we find that although the minimum rate 
 of the imperial tax is ten per cent and the maximum thirty 
 per cent, the rates as a whole are not so high as in many of 
 the local schedules. For, while the maximum rate under 
 the imperial measure falls on a value increment of 290 per 
 cent or above, the maximum under the local systems is 
 usually levied on a lower increment. Thus in Frankfurt a. 
 M. an increment of 130 per cent of the purchase price or 
 above is taxable at the rate of twenty-five per cent, while 
 in Cologne, 160 per cent is taxable at that rate; under the 
 imperial tax, however, the rate of tax on a value between 
 130 to 160 per cent is only from sixteen to eighteen per 
 cent. The difference, of course, Hes in the fact that while 
 the rate of the imperial tax increases by one per cent for 
 every twenty per cent (up to 190 per cent) and every ten 
 per cent (from 190 to 290 per cent) increase in the incre- 
 ment, the local rates increase by one per cent for every 
 five or ten per cent increase. 
 
 With respect to the exemption of a minimum increment 
 
 ^ We must bear in mind, however, that in both these cities only the 
 future value increment is taxable, so that the productiveness of the tax 
 is considerably reduced. Cf. supra, p. 166.
 
 168 THE TAXATION OF LAND VALUE 
 
 from taxation, the method of levy under the Cologne ordi- 
 nance is exceptional.^ Usually in the local measures, a 
 minimum exemption is allowed only in case the increment 
 does not exceed a certain percentage of the purchase price. 
 When the increment is taxable, however, no minimum 
 exemption from the tax is made. For example, assume the 
 minimum increment exempted under the ordinance to be 
 ten per cent, then when the increment is 250 marks, and 
 the purchase price 3000 marks, the increment is not taxable 
 because it is less than ten per cent of the purchase price. 
 But were the increment 320 marks, the whole increment 
 would be liable for the tax. In Cologne, however, the 
 method of levy is different; in every case ten per cent of the 
 purchase price (in the assumed instance 300 marks) would 
 there be exempted from taxation. Hence, in the assumed 
 case only twenty marks would be the taxable value. For 
 purposes of ascertaining the rate of tax, however, the ex- 
 empted 300 marks would be included. 
 
 The scale of rates and method of levy in Hamburg and 
 Berlin are somewhat different. In Hamburg, the rate of 
 tax is calculated according to the following schedules: ^ 
 
 (a) On any increase in value 
 
 Up to 2,000 marks 1 per cent 
 
 Between 2,000 " and 4,000 marks 1 " 
 
 4,000 ' " 6,000 " 2 
 
 6,000 " " 8,000 " 2i 
 
 8,000 " " 10,000 " 3 
 
 10,000 " " 20,000 " S| 
 
 20,000 " " 30,000 " 4 
 
 30,000 " " 40,000 " 4 
 
 Over 40,000 6 
 
 (6) In addition, if the increment exceeds ten per cent of 
 the purchase price, the rate under (a) is increased by: 
 
 * Jahrbuch der Bodenreform (1905). Section 6 of the Cologne ordi- 
 nance reads: "An increase of value of ten per cent or less is in all cases 
 exempt from the tax. If the value increment exceeds this percentage, 
 the whole percentage of increment is to be counted in determining the 
 rate of tax. (Italics mine.) 
 
 * Cf. Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, p. 17.
 
 TAX ON VALUE INCREMENT IN GERMANY 169 
 
 10 per cent, if increment is between 10- 20 per cent inclusive 
 
 20 
 SO 
 40 
 50 
 60 
 70 
 80 
 90 
 100 
 
 exceeds 
 
 20- 80 
 SO- 40 
 40- 60 
 60- 60 
 60- 70 
 70- 80 
 80- 90 
 90-100 
 100 
 
 The Hamburg system, it will be noted, resembling 
 therein the imperial tax, does not allow a minimum exemp- 
 tion, thereby deviating from the usual practice, but in- 
 suring more productive returns from the tax.^ 
 
 The question of rebate on the basis of the length of 
 ownership and the utilization of the property has been 
 treated variously by the localities. First, some cities al- 
 low no reduction whatever; such are, for example, Gross- 
 Lichterfelde and Liegnitz. Secondly, some grant no reduc- 
 tion in case of unimproved land; such are, Dortmund, 
 Essen, Pankow, Weissensee, and others. Thirdly, there 
 are a number of cities which make no distinction between 
 improved and unimproved land, but allow a reduction of 
 the tax on the basis of length of tenure; thus, in Cologne, 
 the reduction of the tax is one-third, if more than five, but 
 not more than ten, years have elapsed since the preceding 
 purchase, and two-thirds if the period exceeds ten years; ^ 
 in Hamburg, a rebate of one-fourth of the tax is granted 
 if the length of ownership has exceeded thirty years, and 
 the tax is increased by one-fourth if the length of owner- 
 ship has been less than ten years.' The case is slightly dif- 
 ferent in Frankfurt a. M. where no distinction is drawn 
 between improved and unimproved land for purposes of the 
 
 * K8ppe (op. cit., p. 727) points out that there will be the incentive to 
 sell the property in portions and piecemeal to avoid paying the higher 
 additional rates. But this method of evasion, which is possible under all 
 the systems, must be prevented by special provision. 
 
 * See infra, table, pp. 170 jf. 
 
 * The rates of tax in Hamburg range, therefore, from three-fourths to 
 twelve and one-half per cent of the increment.
 
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 TAX ON VALUE INCREMENT IN GERMANY 173 
 
 increment tax. But instead of a reduction, the rate of the 
 increment tax is changed to the rate of the additional 
 "Umsatzsteuer," if the ownership exceeds twenty years.* 
 Fourthly, in some cities, the reduction is based on both 
 criteria, length of ownership and condition of the land; 
 thus, Breslau collects, when the land is improved, two- 
 thirds of the tax in case of a tenure of over five years, 
 one-third of the tax in case of a tenure of over ten years; 
 when the land is unimproved, however, the reduction is 
 one-third when over ten years, and two-thirds when over 
 twenty years. 
 
 In contrast to these methods, the system of reductions 
 under the imperial tax, one per cent and one and one-half 
 per cent for each year according to the length of ownership, 
 is novel. The principle underlying the reductions, however, 
 is the same, the longer the period of ownership the more 
 liberal the reduction. But in this provision of the imperial 
 law, no distinction is drawn between improved and unim- 
 proved land. 
 
 20. The effects of this variety of legislation are well 
 seen in the fiscal returns from the local increment taxes. 
 From the above table (see pp. 170-72) this relation be- 
 tween law and fiscal effect is readily traceable. The last 
 column shows the revenue raised by the tax in some of the 
 localities where the system is in operation. The most sig- 
 nificant facts that the figures present are: (1) the smallness 
 of the yield; (2) the fluctuating amounts, as in Frankfurt 
 a. M., for example; (3) the disproportionate proceeds 
 viewed from the standpoint of the size of the cities. 
 
 In considering these facts it must be borne in mind that 
 most of the communities are exceptionally small (see col- 
 umn 1), that the tax has been in operation but a short time 
 (see column 2), and that the tax is an indirect one, col- 
 lectible upon certain occasions. Bearing in mind that the 
 
 ^ But under this " Umsatzsteuer," the rate is different for improved 
 and unimproved land. Cf. supra, 6.
 
 174 THE TAXATION OF LAND VALUE 
 
 yield of the increment will fluctuate from year to year ac- 
 cording to market conditions, the industrial prosperity of 
 the city, and other conditions, we nevertheless discover 
 from the figures a close relationship between the provi- 
 sions of the statutes and the proceeds of the tax. For ex- 
 ample, taking the average receipts for the three years 
 (1907-09), it is significant that Breslau, with a popula- 
 tion three times that of Dortmund, raised only about 
 eighty per cent of the revenue yielded by the tax in 
 Dortmund; or that Weissensee, with a population less 
 than one-tenth that of Cologne, raised on an average, 
 during the same period, a greater sum than the latter 
 city. 
 
 The explanation will be found in comparing columns 3, 
 4, and 5. The tax in Weissensee is retroactive without 
 limit, and allows no reduction in case of unimproved land; 
 in Cologne, on the other hand, only those increments that 
 have accrued since the enactment of the ordinance are 
 taxable, and the same reductions are made in the case of 
 unimproved as in that of improved land. A striking in- 
 stance of eflFectiveness due to legal provision is furnished by 
 Pankow, a town of only 29,000, and just turning urban in 
 character so that speculation is especially rife there. It is 
 noteworthy that, in 1909, the receipts from the increment 
 tax exceeded those of Breslau and Cologne, and came close 
 to those of Frankfurt a. M. And so in the other cities, 
 leading us to the conclusion that from a fiscal standpoint 
 some of the German local systems were more effective than 
 others, according as the reductions were fewer, the scale of 
 rates higher, and the retroaction longer. 
 
 Another cause for the fluctuating and slight yield of the 
 local taxes can be traced to the excessive litigation which 
 the different laws have given rise to. The legality of the 
 "Wertzuwachssteuer" has been questioned, especially its 
 retroactive feature. The validity of the Frankfurt ordi- 
 nance was established, however, by the decision of the
 
 TAX ON VALUE INCREMENT IN GERMANY 175 
 
 Prussian court in 1906.^ Nevertheless, the local authorities 
 have sustained many losses on account of the litigation.' 
 For example, in Schoneberg, 500,000 marks had been col- 
 lected as tax from one of the " Millionenbauern." He con- 
 tested the legality of the law, on a technicality, with the 
 result that the money had to be returned to him.' In- 
 deed, the comparatively smaller yield of the tax, in 1908, 
 in Cologne, is attributed to the decisions of the court in 
 favor of the appellants.* 
 
 In connection with the fiscal aspect of the local incre- 
 ment taxes, it is important to point out some of the uses to 
 which the revenue from the tax has been put in the cities. 
 It is the general belief that the value increment is socially 
 created, that is, attributable to the growth of the com- 
 munity through public improvements, protection, and in- 
 crease in population. Hence the utilization of the tax for 
 social welfare work, sanitation, educational and recrea- 
 tional facilities, and public utilities generally (items which 
 consume an ever-growing percentage of the local budgetary 
 funds), has found favor in many communities. For this 
 reason and probably, too, because of the fluctuations in the 
 yield of the tax, some of the cities have established special 
 funds out of the proceeds. In Frankfurt, for instance, the 
 fund is devoted to school building purposes and to the 
 erection of other educational institutions. In Markran- 
 
 * Boldt, Die Wertzuwachssteuer, p. 15. The legality of the imperial 
 tax has been upheld by the imperial court. Cf. AmUiche Miiteilungen 
 iiber die Zuwachssteuer (1912). (Entscheidungen der obersten Gerichts- 
 hofe.) 
 
 * Boldt, Die Wertzuwachssteuer, p. 128. The experience of Dortmund 
 has been more favorable, since out of 225 assessments only thirteen com- 
 plaints were voiced. 
 
 * " Verhandlungen des Vereins fflr Sozialpolitik," in Schriften des Ver- 
 eins, vol. cxxxvni, p. 43. 
 
 * Cf. Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, p. 19. It 
 will be recalled that in Cologne a valuation of the land was necessitated 
 by the provision for taxing only the future value increment. By unifying 
 all the measures through the imperial law, it is hoped the excessive losses 
 of revenue through litigation will cease.
 
 176 THE TAXATION OF LAND VALUE 
 
 stadt, it is devoted to street building; while in Marburg it 
 constitutes the communal land purchase fund,^ 
 
 21. How, then, were the local bodies which already 
 taxed the value increment of land affected by the enact- 
 ment in 1911 of the imperial law? Until 1915, under the 
 provision of the Act, such communities were to sustain no 
 fiscal loss. First, where the average yield of the tax prior 
 to the Act had amounted to more than the forty per cent 
 subvention under the new law, the community profited by 
 the difference in comparison with the local bodies that 
 had no increment tax. In Prussia the number of such 
 '*Gemeinden" was one hxmdred and sixty.^ Secondly, the 
 local governments were permitted to retain the old system 
 of levying the increment tax. But until 1913 only seven 
 cities had taken advantage of this permission, namely, 
 Hamburg, Liibeck, Emden, Erfurt, Essen, Frankfurt a. 
 M., and Gelsenkirchen. Thirdly, additional rates could 
 be levied by any "Gemeinde" to the value of one hun- 
 dred per cent of the imperial tax. Sixty-six local bodies 
 had taken advantage of this privilege.' Finally, all the 
 other communities profited by the introduction of the 
 "Reichszuwachssteuer," receiving forty per cent of the 
 receipts from all the taxable land transfers in their juris- 
 diction. 
 
 The proceeds from the imperial tax until the amendment 
 of the Act, July 3, 1913, were for the fiscal years 1911-12 
 24.2 million marks, and for the following year nearly double 
 that amount. Of these receipts the central government 
 received 10,069,340 marks the first year, and 20,021,897 
 marks the second fiscal year.* 
 
 By the amendment of the Act of 1911, adopted July 3, 
 1913, the central government relinquished its quota of the 
 
 ^ Kommunales Jahrbuch (1909), vol. i, p. 651. 
 
 * Berthold, Ergebnisse der Wertzuwachssteuer, p. 22. 
 
 Ibid., pp. 21-22; cf. Kommunales Jahrbuch (1914), p. 740. 
 
 * Annalen des deutschen Reicha (1912), vol. XLV, p. 780; Jahrbuch der 
 Bodenreform, vol. ix, p. 239.
 
 TAX ON VALUE INCREMENT IN GERMANY 177 
 
 tax, so that the levy of the value-increment tax on land will 
 henceforth belong to the local and state governments. The 
 communities shall continue to impose the tax in accord- 
 ance with the Act of 1911, or shall adopt another system of 
 increment tax subject to state regulation and in conformity 
 with state law. The communities that received the excess 
 amount over the forty per cent subvention will be per- 
 mitted until April, 1915, to raise enough revenue to cover 
 the excess; while the seven cities ^ that had retained their 
 old systems of levy may continue to raise the tax thus with 
 the consent of the state government, and to keep the ex- 
 cess over the designated average yield. A minor provision 
 permits the tax oflficials, with the consent of the state gov- 
 ernment, to refrain from assessing and collecting a small 
 increment tax, the amount of which is disproportionate to 
 the cost of the assessment. ^ 
 
 22. The history of the virtual repeal of the imperial 
 tax on land value throws light on the important question of 
 the fiscal, social, and economic effects of the tax. The pro- 
 posal to raise more revenue for defence by means of an im- 
 perial value-increment tax on all property directed the dis- 
 cussion in the Reichstag in June, 1913, to the increment 
 tax on land. The repeal of the latter was sought on these 
 grounds: (1) The enactment of the more general increment 
 tax would occasion double taxation if the increment tax on 
 land were retained. (2) The cost of administration of the 
 tax was out of all proportion to the yield. (3) The appeals 
 involved endless litigation. (4) The tax imposed a hardship 
 on the small owner. (5) The various needs and conditions 
 in the different communities were not taken into account. 
 (6) The effect of the tax on the realty market and the loan 
 market was deleterious. 
 
 On two points there seemed to be a general consensus of 
 
 * Cf. supra, p. 176. 
 
 * "Gesetz Uber Andeningen im Finanzwesen," printed in Jahrbuch der 
 Bodenreform, vol. ix, p. 237.
 
 178 THE TAXATION OF LAND VALUE 
 
 judgment in the Reichstag including even the radical 
 parties.^ First, the Act of 1911 was defective in the fram- 
 ing and had inflicted considerable hardship on other than 
 speculative landowners. Secondly, it was desirable and 
 expedient for the municipalities and other local bodies to 
 continue to levy the increment tax. These facts and the 
 widespread unpopularity of the tax, rather than the argu- 
 ment of double taxation were responsible for the repeal 
 practically of the imperial law. Among the defects of the 
 Act are the complex provisions which make the valuation 
 difficult, and the costliness of the assessments of the smaller 
 estates in proportion to the tax revenue derived from them. 
 This is appreciated when we learn that in Berlin 64.1 per 
 cent of all the transfers of property in 1911, and in Char- 
 lottenburg 68 per cent, were exempt from the increment tax; 
 and that the percentage of exempt transfers is similarly 
 large in other cities. ^ A member of the Reichstag told how 
 in Fulda the expense incurred for the salaries of the tax 
 officials exceeded the amount of tax accruing to the Em- 
 pire.' Coupled with the costliness of administration was 
 the expense of the excessive and prolonged litigation oc- 
 casioned. Other complaints arose from the difficulty of 
 ascertaining the unearned increment and from the hard- 
 ships imposed upon the seller of heavily mortgaged prop- 
 erty who was without ready money to pay the tax. 
 
 The relegation of the tax to the localities after two years' 
 experience with the imperial levy was a decided victory for 
 the advocates of the tax for local purposes, and for the 
 principle of benefit in taxation. The imperial law failed to 
 take into account local conditions. The difference between 
 urban and rural property and between large and small 
 
 * The Social Democrats had voted against the " Reichszuwachs- 
 steuer" bill in 1911; in 1913, however, they were opposed to its repeal, 
 but their leaders admitted the defectiveness of the law. 
 
 * Berthold, op. eit., p. 68 Jf. 
 
 * See Extracts from the proceedings of the Budget Committee and in 
 the Reichstag in Jahrbuch der Bodenreform, vol. ix, p. 199^.
 
 TAX ON VALUE INCREMENT IN GERMANY 179 
 
 municipalities, the effect of public improvements on prop- 
 erty in town and country, etc., are factors to be considered 
 in framing a law for the taxation on land value. It was also 
 argued that only the immediate community is in a position 
 to decide the expediency of the tax. ^ Then, too, the failure 
 of the central administration to save expense and to pre- 
 vent excessive litigation further justified the change in the 
 law. 
 
 In considering the social and economic effects of the tax, 
 it is important to note that, in spite of the action taken with 
 regard to the increment tax, the principle of the tax was 
 very generally upheld and accepted. " The socio-political 
 significance of the tax on value increment lies in the change 
 of public opinion which formerly decried the tax as socialis- 
 tic and confiscatory, but which now, as a matter of course, 
 regards it as a supplement to the income and property 
 taxes." 2 
 
 We find the same expectations and apprehensions cur- 
 rent in Germany when the tax was proposed as in the case 
 of the Australasian colonies. The chief hope of the partisans 
 was that speculation in land would be suppressed, especially 
 the speculation which develops when the agricultural 
 prairie value of the land is converted through social forces 
 into building-land value.' The other benefits expected to 
 accrue, such as building reform, lower rentals, industrial 
 prosperity, centered about the checking of speculation in 
 land. It was believed that if the speculators did not keep 
 land ripe for building out of use, and if the "Terraingesell- 
 
 * See Extracts from the proceedings of the Budget Gjmniittee and in 
 the Reichstag in Jahrbuch der Bodenreform, voL rx, p. 233. 
 
 * Soziale Praxis, vol. xix, p. 760. 
 
 * In a speech on fiscal problems, in 1904, Professor Wagner touched 
 upon this point when he said, " Now, when lurban land has become the 
 common object of speculation and changes hands as readily as a bank- 
 note, now, when the owner mortgages his property to about three-fourths 
 of its value, . . . [another kind of tax] on the value increment is neces- 
 sary." Schriften der Gesellschaft fiir Soziale Reform (1904), Heft 15, pp. 
 27-28, 30.
 
 180 THE TAXATION OF LAND VALUE 
 
 schaften" in the cities did not monopolize the building 
 trade as well as the land, the housing evils would disappear, 
 building operations and industry would prosper, and as a 
 result of the increase in the supply of land and houses, the 
 market price of land would fall to the normal value, while the 
 capitalized rental, and therefore rents, would be reduced.* 
 
 On the other hand, some of the opponents, agreeing that 
 the tax would cause a decline in the market value of land, 
 feared the consequences; for example, the stagnation in 
 land sales. Others argued that the effect would be to raise 
 rent because the tax would be shifted to the purchaser and 
 by him to the tenant. And, consequently, the market price 
 of land would tend to appreciate. As regards building 
 operations, it was claimed by some that overbuilding would 
 result, that by putting a premium on improved land, even 
 garden and other open spaces would be built upon to the 
 detriment of social health and welfare; by others, that the 
 supply of houses already filled the demand, that there is no 
 land actually ripe for building which is kept out of use, 
 that, therefore, no increase in building operations is pos- 
 sible. 
 
 To what extent experience with the tax justifies the con- 
 tentions outlined above, we shall show from three sources 
 of evidence, the results of two oflScial investigations and of 
 the valuable study by Dr. Berthold. The latter throws light 
 on the working of the imperial tax, the two former on that 
 of the local systems. 
 
 The following statements from municipalities were re- 
 ceived by the Mayor of Kiel in answer to his inquiry with 
 regard to the practical working of the tax: ^ 
 
 Frankfurt a. M. : "The expected decline in land transfers, 
 which was feared on the part of some, has failed to materi- 
 alize. There has been no noticeable stagnation, nor retro- 
 gression in the development of land-value increments." 
 
 * Cf. Jahrbuch der Bodenreform, vol. ix, pp. 217-18. 
 
 Soziale Praxis (1907), vol. xvii, p. 322. (Translation by writer.)
 
 TAX ON VALUE INCREMENT IN GERMANY 181 
 
 Cologne: "Retarding influences as regards land sales 
 due to the introduction of the increment tax have not thus 
 far set in." 
 
 Gelsenkirchen: "Regarding the practical enforcement of 
 the law, no unusual diflSculties have presented themselves. 
 . . . Nor has a decline in land transfers or in building opera- 
 tions resulted therefrom. The new tax bill has undoubtedly 
 justified itself, and will continue to constitute a very valu- 
 able supplement to the local tax system." 
 
 Dortmund: "Notwithstanding the fact that, prior to 
 the enforcement of the tax, speculators had consummated 
 all the land transfers possible in anticipation of the law, 
 the tax has, nevertheless, yielded a revenue of 263,000 
 marks. There have been 150 land sales, and of these 149 
 represented purchases by the larger estate holders and by 
 speculators." 
 
 Prior to the enactment of the "Reichszuwachssteuer** 
 the Imperial Finance Committee caused an investigation 
 to be made inquiring into the effects of the tax in the 
 localities. Replies from more than three hundred commu- 
 nities were received. Only three reported that there had 
 been a decrease in building operations since the introduc- 
 tion of the tax. In three towns the tax was said to have 
 induced the "Terraingesellschaften" to build. Only ten 
 claimed that rents had decreased on account of the tax, 
 seven that the tax had caused rents to increase; while 
 eleven reported that the tax was shifted in whole or in 
 part to the buyer. ^ 
 
 The study of Dr. Berthold was directed to determine 
 from oflScial data the effect of the imperial tax on the 
 realty market during the two years' operation of the tax.* 
 His tables comparing the number and value of the trans- 
 actions in real estate from 1909 to 1913 show conclusively 
 
 1 Jahrbuch der Bodenreform (1910), Heft 4, pp. S15 ff. Berthold, 
 op. cit., p. IS. 
 * Ibid.
 
 182 THE TAXATION OF LAND VALUE 
 
 that in the majority of the towns there were fewer trans- 
 actions in 1911 and 1912 than in the two preceding years. 
 They also show that the introduction of the tax was not 
 the primary cause of the stagnant conditions of the market. 
 The depression in realty operations during 1911-12 is 
 traceable to the general unfavorable business conditions, to 
 an excess of vacant houses, to the tight money market, 
 and to local conditions. Dr. Berthold, however, does not 
 deny that the agitation relative to the enactment of the 
 "Reichszuwachssteuer," as well as the practical impossi- 
 bility of calculating before the sale the amount of tax, may 
 have added to the general depression. 
 
 A second point of inquiry, less conclusively established, 
 however, was with regard to the incidence of the increment 
 tax. Only where the property is indispensable for business 
 purposes will the seller be able to shift the tax. But in such 
 cases the seller might have charged the higher price ir- 
 respective of the tax. In certain communities attempts 
 were made to shift the tax, but not always successfully.^ 
 As yet the problem of the incidence of the "Zuwachssteuer " 
 has not been solved through any careful research. Authori- 
 ties are, nevertheless, agreed that experience confirms the 
 theory that the tax burdens the seller only. Neither the 
 market price of land nor rentals have risen, according to the 
 testimony of oflficials and others. Admitting the absence of 
 any far-reaching evidence on the subject of incidence, Dr. 
 Boldt,^ for example, attempts to show that in Diisseldorf 
 where no increment tax is in operation, the average rental 
 and value of the land are higher than in either Essen 
 or Dortmund, cities of the same industrial type and of 
 approximately the same size, but which levy an incre- 
 ment tax. There is, indeed, little evidence to show that 
 the tax has been shifted to the buyer; on the other hand, 
 
 * Berthold, op. cit., p. 114. 
 
 ' " Verhandlungen des Vereins fUr Sozialpolitik," in Schrijten dea 
 Vereins, vol. cxxxviii, p. 46.
 
 TAX ON VALUE INCREMENT IN GERMANY 183 
 
 theory holds that the possibility of so shifting the tax is 
 slight. 1 
 
 One of the causes attributed by Dr. Berthold to the 
 stagnant condition of realty operations was the difficulty 
 of obtaining mortgage loans, especially where the security 
 was a second mortgage. This scarcity of loan funds, added 
 to the higher rate of interest on mortgage loans,^ hindered 
 the acquisition of property and interfered with building 
 operations. Nowhere, however, does the above-named 
 writer relate this scarcity of mortgage loans to the intro- 
 duction of the increment tax, nor does he seek to discover 
 whether any causal relationship exists between the two. 
 Nevertheless, the losses incurred by mortgagees through 
 foreclosures and the hardships that the payment of incre- 
 ment tax imposes on the seller of property heavily mort- 
 gaged may have had some deterrent influence in the loan 
 market on such security. In this connection the argument 
 of another writer' who favors the " Zuwachssteuer " de- 
 serves mention. He opposes the retroactive feature of the 
 tax on account of its deleterious effect on the mortgage 
 market and its interference with credit. 
 
 This question brings us to the consideration of the effect 
 of the tax on speculation in land. Because of the general 
 dependence of land and building speculators in Germany 
 on mortgage loans, a weeding out process of the insolvent 
 operators, those who operate on borrowed capital, was 
 observed during the depression of 1911 and 1912. If, then, 
 the tax on value increment has been effective in checking 
 second mortgage loans, it has at the same time hindered 
 speculation, i.e., those operations which are carried on 
 almost entirely with borrowed capital. Moreover, the pay- 
 ment of the tax has in many such cases forced the seller into 
 
 * Cf. Weyerman, "Die UberwUlzungsfrage bei der Wertzuwachs- 
 steuer," in Annalen des deutschen Reichs (1910), vol. xliii, pp. 881 Jf. 
 
 * Berthold, op. cit, pp. 97, 103 et passim. 
 
 ' Freudenberg, Die W ertzuwachssteuer in Baden, pp. 3-4.
 
 184 THE TAXATION OF LAND VALUE 
 
 bankruptcy. Thus, whether the depression in the mortgage 
 loan market can be attributed to the tax or not, the tax is 
 said to have actually hindered the most undesirable kind of 
 speculation in land. This effect of the tax may indeed 
 account for the inordinate activity of the "Terraingesell- 
 schaften " and the pressure brought to bear upon the gov- 
 ernment by them to repeal the imperial tax.^ The rate of 
 tax, however, has been too slight to restrain speculative 
 dealings to any considerable extent in cities where the 
 value of the land has appreciated a hundredfold or more, 
 and where the process of appreciation continues. ^ 
 
 23. Taxation of land in Kiao-chau. The justification 
 for treating of the Kiao-chau experience with land taxa- 
 tion in this chapter lies not in the similarity of the systems 
 of taxation so much as in the political status of the Far East- 
 em province with respect to Germany. There are those, 
 indeed, who would trace the local increment taxes in Ger- 
 many to the Kiao-chau experiment, but, as has been shown 
 in the previous sections,' there is sKght cause for such a 
 hypothesis. After all, the system of taxation in Kiao-chau 
 is undoubtedly part and parcel of the larger scheme of Ger- 
 man "Sozialpolitik" with respect to this province.* 
 
 Kiao-chau situated in Eastern Asia was acquired by 
 Germany in 1898, and according to a treaty with China was 
 to remain under German protection for ninety-nine years. 
 
 * Cf. the speech of Dr. Jaeger in the Reichstag printed in Jahrbuch 
 der Bodenreform, vol. ix, pp. 217-18. 
 
 * "Many persons hope that the tax will quicken the utilization of 
 building sites. In my opinion, however, that is an illusion, for just as 
 it is unlikely that a comparatively small increase in the tax will cause 
 the suburban owner to give up his gardens, so it is also unlikely that the 
 land speculators in rapidly growing towns will be compelled to any extent 
 to sell their land, which will after a longer period of waiting reimburse 
 them manyfold for the burden of the tax." Ephraim, " Zur EinfUhrung 
 der 'Steuer nach dem gemeinen Wert' in Oldenburg," in ZeiUchriJt fur 
 die gesamte Staatsvnssenschajt (1910), p. 161. 
 
 ' See supra, 3-6. 
 
 * Denkschrift betreffend die Entvncklung des Kiautichougebieis (1904- 
 06), p. 8.
 
 TAX ON VALUE INCREMENT IN GERMANY 185 
 
 The natives, numbering 187,000, are Chinese. Of Euro- 
 peans there are over 4000.^ Since the German occupation, 
 railways, roads, and other improvements have been built, 
 and the province is said to be developing industrially and 
 commercially. 
 
 The naval authorities in charge of Kiao-chau, with a 
 knowledge of the land situation in other Eastern provinces, 
 in 1898, introduced a bill in the Reichstag designed to pre- 
 vent land speculation and to help pay the vast sums ex- 
 pended by the government for public improvements.^ This 
 Act authorized the government to buy up from the natives 
 any land needed for building purposes. The price was to 
 be a nominal one, i.e., what the land was worth before the 
 German occupation, and this land was to be sold again to 
 the highest bidders, the government reaping the profit of 
 the increased value. No one was to lease, use, or sell land 
 for any purpose whatsoever without the permission of the 
 government.' In fact, this land policy is unique in its re- 
 strictions of private property in land. 
 
 24. At the same time that the land bill was passed, 
 the following tax scheme for Kiao-chau was enacted. An 
 annual direct tax of six per cent is levied on the land which 
 the government has sold.* It was provided that for pur- 
 
 * Tsingtau, the chief town, had, in 1902-03, besides soldiers 962 Euro- 
 peans, 108 Japanese, and 28,144 Chinese. Denkschrift betreffend, etc. 
 (1902-03), p. 23. Statistisckes Jahrbuch far das deutsche Reich (1914), 
 p. 449. 
 
 * ' After the acquisition of Kiao-chau it was to be expected that the 
 value of the land would appreciate considerably. Hence it was feared 
 that the native Chinese would dispose of their property to a greater or 
 less degree for a little temporary profit. It was a question, therefore, 
 of protecting the landed interests of the Chinese, to defend them against 
 themselves, and to prevent a dispossession of the Chinese by the white 
 population." Translated from Gaul, Finamrecht der d. Schutzgebiete unter 
 besonderer Berucksichtigung der Steuergesetzgebung, p. 163. 
 
 Denkschrift betreffend, etc. (1903-04), p. 8. 
 
 * The land which the government did not buy from the natives re- 
 mained subject to the slight tax prevalent before the occupation. The 
 tax is on an average 200 cash (about 30 pfennige) for 614 square metres. 
 Ihid., p. 6.
 
 186 THE TAXATION OF LAND VALUE 
 
 poses of assessment, the price paid for the land was to 
 constitute its value until 1902; after that year and at 
 regular intervals, the land was to be revalued. Besides 
 this direct tax the Act provided that, whenever the land 
 should be sold, thirty-three and one-third per cent of 
 the net profit, or value increment, should revert to the 
 government. An allowance, or compensation for im- 
 provements, of six per cent was to be deducted from the 
 gross increment. In every case, moreover, the govern- 
 ment retained the option of purchase at the price de- 
 manded by the owner. 
 
 Bearing in mind that these taxes, as well as the policy as 
 a whole, were to prevent land speculation and to provide 
 more dwellings, we may note that the government was 
 confronted with the problem of making the purchasers 
 improve the land which they had acquired. In other words, 
 the tax and restrictions did not prevent owners from keep- 
 ing their land in an unimproved condition, apparently for 
 speculative purposes. The fact was, however, as is very 
 often the case in urban communities, that the land remained 
 undeveloped, either because the owner lacked the means 
 to build, or because the time was unfavorable for building. 
 But this frustrated the purpose of the government. The 
 authorities were accordingly authorized to repurchase any 
 unimproved land at one-half the price which the owners 
 had paid for it. This provision was found ineflfective, since 
 the authorities lacked the ready funds to repurchase the 
 land.* In 1903, therefore, the plan was conceived of in- 
 creasing the annual tax so long as the land remained un- 
 developed. This is said to have had the desired effect. 
 According to this scheme which was not to be enforced 
 until 1906, land not utilized for the purpose for which it had 
 been purchased was made liable to an annual tax of nine 
 per cent instead of the usual six per cent; if three years 
 
 * Jahrbwk der Bodenreform (1908), vol. IV, p. 1S2; C/. Denkschrift 
 betreffend, etc. (1902-03), pp. 9-10.
 
 TAX ON VALUE INCREMENT IN GERMANY 187 
 
 passed after this increased rate became effective, the tax 
 was raised to twelve per cent; and this three per cent in- 
 crease was to continue with every three years until an 
 annual tax of twenty-four per cent had been reached. 
 The Act provided, furthermore, that whenever the land 
 should be built upon and improved, the tax should be 
 reduced to six per cent.^ 
 
 Another provision in the Land Act of Kiao-chau re- 
 stricting the property rights to land even more is the fol- 
 lowing. The government not only retains the right of 
 repurchase, but in the case of land which has remained 
 unsold within twenty-five years, the land becomes subject 
 to revaluation and a tax of thirty-three and one-third per 
 cent is levied on the value increment. 
 
 25. What has been the effect of such limitations of the 
 right of private property on the real estate market? While 
 no overcapitalization of the value of land under such re- 
 strictions is conceivable, both the land market and the 
 values are sound in Kiao-chau. Land transactions occur 
 and land has risen in value.^ An official describes the first 
 public sale of land as follows: "In spite of all the restric- 
 tions necessary to nip speculation in the bud, there was no 
 lack of solvent buyers ready unhesitatingly to bid higher 
 than the government's estimates, showing thereby that the 
 merchant class did not question the healthy development 
 of the colony." ' 
 
 In considering the proceeds from the land taxes as shown 
 in'the table below, it should be borne in mind: (1) that the 
 population of Kiao-chau is small; (2) that land is exceed- 
 ingly cheap compared with European countries; (3) that 
 
 1 Jahrbuch der Bodenreform (1908), vol. iv. p. 1S2; Cf. Denkschrift 
 betreffend. etc. (1902-03), pp. 9-10. 
 
 * In a decade land is said to have increased from 200 to 800 per cent: 
 from $50 for 921 square meters the value had risen to about $150 or 
 $160, while orchard land was worth in 1908 about $200. Denkschrift 
 betreffend, etc. (1908-09), pp. 37-38. 
 
 Jahrbuch der Bodenreform, March, 1911, p. 37. (Translated.)
 
 188 
 
 THE TAXATION OF LAND VALUE 
 
 sales are comparatively few; * and (4) that some of the land 
 has not advanced in price. Thus, there were only thirty-one 
 transfers of property in 1908-09; yet they yielded no 
 value-increment duty.^ 
 
 TABLE SHOWING YIELD OF THE LAND AND INCREMENT 
 TAXES, RENTS FROM LEASEHOLDS, AND PROCEEDS 
 FROM LAND SALES IN KIAO-CHAU 
 
 
 Land 
 
 Tax 
 (Marks) 
 
 Rents 
 
 Govern- 
 
 
 Year 
 
 from lease- 
 holds 
 (Marks) 
 
 ment land 
 
 sales 
 (Marks) 
 
 Value-increment 
 duty 
 
 1898-99 
 
 22,170 
 
 5,870 
 
 
 
 1899-00 
 
 31,371 
 
 21,910 
 
 
 
 1900-01 
 
 52.765 
 
 31,049 
 
 . , 
 
 
 1901-02 
 
 62,956 
 
 23,305 
 
 
 
 1902-03 
 
 63,961 
 
 19,676 
 
 24,422 
 
 
 1903-04 
 
 79,212 
 
 34,113 
 
 63,857 
 
 $1,128.90 
 
 1904-05 
 
 87,498 
 
 60,910 
 
 195,975 
 
 1,474.70 
 
 1905-06 
 
 139,935 
 
 83,013 
 
 149,389 
 
 417.34 
 
 1906-07 
 
 117,591 
 
 91,686 
 
 87,865 
 
 2,103.66 
 
 1907-08 
 
 112,861 
 
 75,877 
 
 73,332 
 
 301.28 
 
 1908-09 
 
 121,017 
 
 59.401 
 
 83,069 
 
 000.00 
 
 It is necessary to point out that the government must 
 rely on other sources than the land for the budget. Tak- 
 ing the revenue from the land taxes, plus that from the 
 rents and from the public land sales, we find that it con- 
 stituted, in 1906-07, about twenty-seven per cent, while, 
 in 1908-09, only nine per cent of the total expenditures.* 
 
 * The following show the number of purchasers of land: 
 
 1902-03, 143 Europeans, 151 Chinese 
 1903-04,158 " 162 " 
 
 1904-05, 197 " 174 " 
 
 1905-06,210 " 194 " 
 
 Denkschrift betreffend, etc. (1908-09), p. 12. 
 
 * Data given in Denkschriften betreffend die Entwicklung des Kiautsehou- 
 gehiets. 
 
 * The total revenue for 1906-07 amounted to 1,546,489 marks; in 
 1908-09, to 2,365,981 marks. Ibid. (1908-09), pp. 66-67.
 
 TAX ON VALUE INCREMENT IN GERMANY 189 
 
 It is, however, not so much from the standpoint of revenue 
 as from that of a sound land policy that the Kiao-diau 
 experiment offers interesting study. And yet, in consider- 
 ing the land policy and the taxes on land value in operation 
 since 1898 in that province, we must bear in mind the ex- 
 ceptional circumstances under which the government ac- 
 quired possession of the land. The problem in older coun- 
 tries, where the principle of private ownership of land is 
 deep-rooted, is far more complex.
 
 CHAPTER V 
 
 THE ENGLISH LAND-VALUE DUTIES 
 
 1. The enactment of the duties on land value which 
 constitute Part I of the Finance Act, 1909-10, marks a 
 decided departure in the jQscal policy of England. This fact, 
 aside from the controversy with the House of Lords over 
 the measure, has evoked widespread criticism and inter- 
 est among students and statesmen. The latter, indeed, 
 regarding the new taxes as social reform, not fiscal, legisla- 
 tion, have questioned the propriety of incorporating the 
 land taxes in the budget. Nevertheless, whatever founda- 
 tion there exists for the prevailing impression that Parlia- 
 ment was carried away by the whirlwind of socialism and 
 other "isms" which were sweeping the country, a study of 
 the attempted legislation prior to the enactment of the 
 Finance Act reveals the fact that the change in fiscal policy 
 was inevitable. 
 
 To set forth the fiscal causes of the new taxes which 
 are generally overlooked, and to demonstrate their un- 
 precedented character, it is important both to show the 
 relation between landownership and land taxation in the 
 United Kingdom, and to trace the movement toward 
 land-value taxation. 
 
 The history of landlordism and land taxes throws light 
 on the strenuous opposition of the Lords to the Finance 
 Act which in 1909 threatened the abolition of the Upper 
 House of Parliament. In view of the fact that the Lords 
 are in the main the landowners of England, the small extent 
 to which land contributes to the support of the govern- 
 ment is significant. Property owners contribute to the fol-
 
 THE ENGLISH LAND-VALUE DUTIES 191 
 
 lowing sources of public revenue. First, there is the so- 
 called annual land tax which since Pitt's redemption 
 scheme in 1798 has yielded less than one million pounds,* 
 or less than half its yield in 1692 when instituted.^ This 
 nominal land charge, it will be recalled, is based on a valua- 
 tion made more than two centuries ago, and is unequally 
 apportioned among the counties of England. Secondly, 
 there is Schedule A of the income tax charged on the gross 
 rental of real property.' Thirdly, under the system of 
 rating by the local authorities, land and its improvements, 
 including buildings, not only yield over eighty per cent of 
 the local tax receipts, but also form the principal source of 
 local revenue.^ In addition to the rates, tithes are still 
 levied on real property in some parts of the United King- 
 dom. Fourthly, land in conjunction with other property is 
 subject to death duties, or inheritance tax, levied for im- 
 perial purposes. Only in this case is the basis of assessment 
 the capital value of the property. 
 
 To estimate to what extent the English landlords are 
 burdened by these charges, it is necessary to analyze the 
 methods of assessment and levy of these taxes so as to ascer- 
 tain their incidence. 
 
 In the first place, it was estimated by the Commission of 
 1901 that ratable property (including structures and other 
 improvements) contributed about seventeen and one-half 
 
 * Cf. Dowell, History of Taxation and Taxes in England, vol. ii, pp. 
 239-40. In 1907-08 the net receipts were 710,000. Cf. Pari Debates 
 (1908), vol. cxcvni, p. 2075. 
 
 * Originally this was a general property tax imposed (1) on those 
 possessing personal property, (2) on those holding any public office or 
 employment of profit, (3) on those possessing land, but because of the 
 evasion of the first two from assessment, the burden fell on land alone. 
 Cf. Dowell, op. cit., vol. iii, pp. 93-97. 
 
 * Pari. Debates (1909), vol. ii, p. 1870. There is a maximum reduction 
 of one-eighth of rental in respect of agricultural land and one-sixth in 
 respect of buildings. 
 
 * In 1909-10 the rates constituted forty-nine per cent of the total 
 revenue of the local bodies of England and Wales, not counting the 
 loans. Statesman's Year Book (1913), p. 49.
 
 192 THE TAXATION OF LAND VALUE 
 
 per cent to the imperial tax receipts; to the local budgets, 
 eighty-two per cent of all the tax revenue.^ But from the 
 standpoint of incidence, it is important to differentiate be- 
 tween the proportions faUing on land and improvements 
 respectively, for according to the best authorities on taxa- 
 tion,^ the tax on buildings is more likely to fall on the oc- 
 cupier than on the landowner or building-owner. The pro- 
 portion that falls on land, irrespective of the buildings, has 
 been variously estimated and differs in Scotland and Ire- 
 land from the proportion in England and Wales. Accord- 
 ing to Bastable, land under Schedule A yielded about 
 twenty-three and one-half per cent, houses seventy-six and 
 one-half per cent (1900), while under the local systems 
 about one-sixth of the rates was derived from land, and five- 
 sixth from houses.' He furthermore estimated that land 
 in the United Kingdom (including all improvements other 
 than houses) contributed (1900) about 12,500,000, which 
 constituted about nine per cent of the total tax revenue for 
 imperial and local taxation.* 
 
 Then, when we consider the possibility of capitalization 
 and amortization in cases of taxes on real property, the 
 burdensomeness of taxation on the landowners appears 
 even less. For according to the theory of amortization the 
 whole tax on land or so much of the tax as exceeds the gen- 
 eral burden of taxation on all capital or income is capitalized 
 and the value deducted from the selling price of the prop- 
 erty, so that the purchaser through this reduction in price 
 becomes exempt from the tax, while the seller loses the 
 whole amount of the capitaUzed tax. In case of taxes of 
 
 Pari. Debates (1909), vol. i, p. 892. 
 
 * According to Seligman, Shifting and Incidence of Taxation (ed. 
 1899), p. 307, even Schedule A must be treated as a tax on real property 
 to ascertain the incidence of that part of the income tax. 
 
 Bastable, Public Finance (ed. 1903), pp. 431-32. 
 
 * Ibid. The percentage was computed with the aid of data from the 
 Statesman's Year Book (1900), pp. 45, 55; the total tax revenue, local and 
 imperial, was given for the United Kingdom as 134,821,081.
 
 THE ENGLISH LAND-VALUE DUTIES 193 
 
 long standing, therefore, the present owner is burdened 
 only by any increase in rate since he came into ownership. 
 The doctrine is especially applicable to the imperial nomi- 
 nal land tax in England, since the assessment has not only 
 remained unchanged for several centuries, but the tax has 
 either been redeemed or has long since been "absorbed" 
 in the selling price, because the apportionment of the quota 
 among the counties has not changed. It is held by Blun- 
 den ^ that even the local rates have to some extent been 
 thus capitalized and ceased to be a burden. Whether this 
 is true or not, there are, as we shall show below, further 
 reasons for believing that but a small part of the rates are 
 borne by the landowners. 
 
 Again, inasmuch as it is upon the rates that the local 
 governments chiefly depend for revenue, and inasmuch as 
 ratable property is heavily burdened for local tax pur- 
 poses, ^ it is of importance in this conection that the bur- 
 den falls mainly upon the occupier, not upon the landlord. 
 The reasons are: (1) The occupier pays the tax in the first 
 instance, and through various causes which we need not 
 dwell upon,' he is unable to recoup himseK for the tax by 
 deducting it from his rent. The following table (Distribu- 
 tion of the Burden of the Rates in England and Wales in 
 1891, on page 194) shows that only 15.31 per cent of the 
 rates on land and houses, in 1891, fell on real property, or 
 rather, on the land owners and lessees. 
 
 * Local Taxation and Finance, p. 43. "But there appears to be good 
 grounds for the conclusion that the burden is mainly, as Dr. Giffen sug- 
 gested in 1871, 'on the property, and not on the individuals who have 
 incomes from it.' " 
 
 ' The average rate per pound on ratable rental increased from 3s. 
 Sid. to 5a. 7|d. from 1882 to 1902. Cf. Armitage-Smith, Primnples and 
 Methods of Taxation, p. 161. 
 
 * See Sehgman, Shifting and Incidence of Taxaiion, pp. 246 ff.
 
 194 
 
 THE TAXATION OF LAND VALUE 
 
 DISTRIBUTION OF THE BURDEN OF THE RATES IN 
 ENGLAND AND WALES IN 1891 ^ 
 
 
 On real 
 property 
 (per cent) 
 
 On personal 
 property 
 (per cent) 
 
 On occupiers' 
 
 income 
 
 (per cent) 
 
 On consumert' 
 
 income 
 
 (per cent) 
 
 Lands and tithes 
 Houses 
 
 15.31 
 3.59 
 
 14.00 
 2.82 
 
 56.4 
 
 4.29 
 
 Railways 
 
 Other property.. . 
 
 3.69 
 
 Total 
 
 18.90 
 
 16.82 
 
 56.40 
 
 7.88 
 
 (2) Since the lessee almost always contracts to pay the 
 taxes, any increase in the rate of tax will be borne by the 
 lessee, at least until the expiration of the lease. Now, in 
 England, the builder is very often a lessee and cannot 
 recoup himself for any increase in the rate until his lease 
 expires. (3) Non-income-bearing land, irrespective of its 
 value, is exempt from rating. Thus, in spite of the enor- 
 mous increase in urban values, land in England and Wales 
 contributed, in 1894, a smaller percentage of the whole tax 
 than in 1814, as shown below: 
 
 CONTRIBUTION OF PROPERTY TO THE TOTAL ASSESS- 
 MENT OF THE LOCALITIES, 1814-1894 ^ 
 
 
 18U 
 
 (per cent) 
 
 1843 
 (per cent) 
 
 1868 
 (per cent) 
 
 18H 
 (per cent) 
 
 Land 
 
 69.28 
 
 27.84 
 
 2.88 
 
 49.10 
 
 41.44 
 
 9.46 
 
 33.20 
 47.27 
 19.53 
 
 20.9 
 
 Houses 
 
 63.7 
 
 Railways and other property . . . 
 
 15.4 
 
 * Blunden, op. cit., p. 62. There is no reason to think that conditions 
 of incidence have changed much since 1891, for the method of assessment 
 is the same. 
 
 * Data gathered from Goschen, Report on Local Taxation, p. 23; and 
 from Report of tlie Royal Commission on Local Taxation (Cd. 9528), 1899, 
 pp. 44-45.
 
 THE ENGLISH LAND-VALUE DUTIES 195 
 
 Furthermore, this system of assessment on rental rather 
 than on capital value, which exempts the owner of imde- 
 veloped land from taxation, has contributed most to the 
 evasion by the landowner of a burden of taxation propor- 
 tionate to his ability or his benefit. The influence of this 
 class, in fact, is seen in their resistance to taxation on the 
 basis of capital value. Thus it was not until 1894 that the 
 death duties were made to apply to real property in the 
 same way as to personal property, that is, on the basis of 
 capital value assessment.^ And until the enactment of the 
 Finance Act, 1909-10, the death duties were the only tax 
 on real property assessed on capital value. 
 
 Finally, the special treatment of agricultural land is 
 noteworthy. The exemption in recent years of about 
 2,000,000 annually from the tax on agricultural land 
 under Schedule A is generally considered to have been 
 a boon to the landlords, rather than to the farmers whom 
 it was intended to relieve.^ The cause of the remission of 
 that amount is of course the decline in the value of agri- 
 cultural land. But this decline, which has made the actual 
 rent paid by the tenant farmer exceed the economic rent, 
 the rent warranted by the produce obtained, has shifted 
 the burden of the taxes from the landlord to the tenant.' 
 A remission of the taxes, therefore, is only apparently a 
 
 * For the opposition of the landowners to this measure see Wagner, 
 " Die Englische Erbsteuerreform von 1894 " in Zeitschrift fur Volksmrt- 
 schaft, Socialpolitik u. Verwcdtung (1899), p. 323. 
 
 * See Agricultural Rates Act (1896), 
 
 Pari. Debates (1909), vol. v. p. 627. Cf. also Seligman, Shifting and 
 Incidence of Taxation, p. 307. The condition of agricultural production 
 in England is peculiar. The depression has caused the land to become 
 depreciated, so that the farmers, because of the immobility of the capital 
 invested and their own inability to enter other employments readily, 
 are paying more than the usual rack rent or economic rent; hence the 
 tax paid by them in the first instance is not shifted to the landowner. 
 "Although the farmer has been struggling to adjust his rent to lower 
 prices, the process has been a slow one; and the fall in actual rents has 
 not kept pace with the fall of economic rent due to these lower prices," 
 Seligman, ibid., p. 232.
 
 196 THE TAXATION OF LAND VALUE 
 
 relief to the farmer; in reality the position of the landlord, 
 when a renewal of the lease is sought by his tenants, is 
 thereby strengthened, and the landlord can resist a re- 
 duction of the rent which conditions would otherwise war- 
 rant.^ 
 
 Thus it is clear that in singling out the landowning 
 class for special taxation, and in choosing land taxes, 
 the incidence of which is supposedly certain, the Lloyd 
 George Budget is a departure from precedent and from 
 the tax legislation hitherto favorable to the landowning 
 class. 
 
 It remains to show, further, that the enactment of the 
 land-value duties was not the revolutionary, unreflected 
 measure of a socialistic parliament. The problem of taxing 
 land value had been well deliberated upon, and the argu- 
 ments pro and con thoroughly weighed by the various 
 Select Committees who, since 1891, had been delegated 
 by Parliament to investigate the intricate problem of local 
 taxation. The anomalous feature in this movement is, 
 rather, that the outcome of the agitation among local au- 
 thorities for land-value rating should have resulted first in 
 an imperial rather than in a local tax. 
 
 2. Discontent with the rating system by which the 
 landowners largely escaped taxation, while the occupiers 
 bore the heavier burden, early asserted itself. The reform 
 movement, after years of agitation, became concentrated 
 upon the following demands: (1) the division of rates be- 
 tween occupier and owner; ^ (2) the taxation of land value; 
 (3) "special assessment" taxation.' We are concerned 
 here with the second reform advocated. 
 
 The expediency of taxing land value was raised by the 
 
 * Cf. also J. S. Nicholson, Rates and Taxes as Affecting Agriculture, 
 where the incidence of the land tax is shown. Cf. also Row-Fogo, An 
 Essay on the Reform of Local Taxation in England, pp. 171-82. 
 
 * The system whereby the owner pays one-half the tax and the occu- 
 pier the other half is in vogue in Scotland and Ireland. 
 
 * Cf. Blimden. op. cit., chapters vii, vin, and ix.
 
 THE ENGLISH LAND-VALUE DUTIES 197 
 
 Housing Committee in 1884.^ In its report the committee 
 recommended that "land available for building in the 
 neighborhood of populous centers" be rated for local pur- 
 poses at four per cent of its selling value. The purpose of 
 the proposal was to relieve the congestion of population. 
 In 1892, the Select Committee on Town Holdings re- 
 ported unfavorably on the taxation of vacant building 
 land as well as on the proposition of separate valuation of 
 land and of improvements. The proposal of the Draft Re- 
 port Committee to tax land on the selling value at a higher 
 rate than buildings, because land receives an exceptional 
 value through the growth of towns, while buildings repre- 
 sent an outlay of capital which is discouraged by taxa- 
 tion,* was rejected by the majority as impracticable. The 
 following conclusions of the Select Committee, which re- 
 fused to recognize the expediency of land-value taxation, 
 were adopted: ' 
 
 " (1) Ground rents and feu^ duties are already taxed, as 
 being included in the ratable value of the town holding 
 on which they are secured. They do not constitute a fresh 
 
 * See Second Series of Memoranda and Extracts Relating to Land Taxa- 
 tion (Cd. 4845), 1909, pp. 71 Jf. It is interesting to note that the late 
 King of England, Edward VII, then Prince of Wales, was a member of 
 that Committee. See Report of the Housing Committee (Cd. 4402), 1885. 
 
 * House of Commons Paper 214 (1892), pp. xcii, xxxvi. The argu- 
 ments used in this draft report are the usual ones. "The growth of towns 
 has added an exceptional value to town lands. Such value is maintained, 
 and has to a great extent been created, by municipal expenditure, and it 
 is therefore just that those who are in receipt of the annual returns from 
 town lands should contribute a substantial proportion of it to defray the 
 municipal expenditure of which they thus reap the fruits. . . . Buildings 
 represent the direct outlay of capital and their return depends substan- 
 tially upon their cost. Heavy rates upon buildings as opposed to land 
 tend to stimulate the erection and use of inferior houses. . . . The annual 
 value of land may be considered as a net return from an improving prop- 
 erty, whereas that of buildings is a gross return from a wasting prop- 
 erty, and it is unfair that they should be taxed at the same rate in the 
 pound," etc. 
 
 Ibid. 
 
 * Feu tenancy in Scotland is perpetual, the rent being a fixed amount.
 
 198 THE TAXATION OF LAND VALUE 
 
 matter of assessment hitherto untouched as is often sup- 
 posed. The imposition of a direct assessment upon such 
 ground rents and feu duties as distinguished from the 
 assessed vakie of the house itself, as at present rated, 
 would lead to anomalies and inequalities and has been 
 generally abandoned. . . . 
 
 " (2) The real as opposed to the apparent incidence of 
 land taxation in towns falls partly upon the owner of 
 the land, partly upon the house owner, and partly upon 
 the occupier. The proportions in which the burden is dis- 
 tributed are difficult to determine and depend upon a 
 variety of circumstances among which the demand and 
 supply of houses is the most important. 
 
 "(3) Owners of ground rents, with or without rever- 
 sions, derive no appreciable benefit from local public ex- 
 penditure for current purposes. . . . 
 
 "(4) The burden of such increased land taxation as 
 was not in contemplation of the parties on entering into 
 leases falls on the lessee, unless the occupier has been un- 
 able to shift it. But as regards lessees, the unforeseen in- 
 crease in the value of their properties has, in most cases, 
 more than made up to them for the unexpected burden 
 of increased rates." 
 
 Four years later the Royal Commission appointed to 
 inquire into the subject of local taxation reached similar 
 conclusions in rejecting the proposition of land-value taxa- 
 tion. After interviewing numerous witnesses and after an 
 extensive investigation their report was published in 1901.^ 
 Again, a separate report on "Urban Rating and Site Val- 
 ues," by a committee consisting of Lord Balfour of Bur- 
 leigh,2 Lord Blair Balfour, Sir Edward Hamilton, Sir 
 George Murray, and Mr. James Stuart, dissented from 
 
 * Final Report of His Majesty's Commission Appointed to Inquire . . . 
 Local Taxation (Cd. 638), 1901. 
 
 ' The same Lord Balfour of Burleigh vigorously opposed the Finance 
 Act, 1909-10, in the House of Lords.
 
 THE ENGLISH LAND-VALUE DUTIES 199 
 
 the majority's findings. Their recommendations were 
 very similar to those of the Draft Report of 1892, with this 
 additional proposal, that the institution of site-value rat- 
 ing by the locality be made optional.^ 
 
 The London County Council and the Glasgow Council 
 were meanwhile active in discussing the question of rating 
 on site value. In the reports of the London County Coun- 
 cil of 1889 and 1893 the adoption of this system was 
 recommended. The council actually undertook to make a 
 valuation of all the land within London.* Similarly, Glas- 
 gow, as early as 1891, and again in 1895, drew up reports 
 favoring the rating of land value.' In the House of Com- 
 mons also considerable discussion took place on the sub- 
 ject, not only in regard to local taxation, but also in re- 
 gard to Schedule A.* To carry out the recommendation 
 
 * The advantages of taxing land value were enumerated in this minor- 
 ity report as follows: (1) It would conduce to placing the urban rating 
 system on a more equitable and thus sounder basis; (2) it would make the 
 ground-owner and lessee having an interest in the land contribute some- 
 what more than under the old system to local taxation; (3) it should go 
 some way toward putting an end to agitation for unjust and confisca- 
 tory measures; (4) it would enable deductions for repairs to be made solely 
 in respect of the buildings; (5) it would tend to lighten the burdens in 
 respect to buildings and thus aid in solving the urgent housing problem; 
 (6) it would tend to rectify inequalities between districts and between 
 owners. Report, etc. (Cd. 638), 1901, p. 176. 
 
 Cf. Pari. Debates (1907), vol. CLXXxn, p. 46; Also, 1909, vol. v, 
 p. 1221. Cf. British Pari. Papers (Cd. 9150), 1899, p. 13. 
 
 * For a discussion of the London Coimty and Glasgow resolutions 
 regarding the taxation of land value see Smart, Taxation of Land Values 
 and the Single Tax, chapters n and in. Not only did the Corporation of 
 Glasgow in 1897 pass resolutions declaring the taxation of land value 
 "the most equitable method of removing the present inequalities of local 
 taxation," but in the same year the Glasgow City assessor proposed an 
 increment tax on land. See British Pari. Papers (C. 9319), 1899, pp. 
 257-58. 
 
 * In view of later events the following speech of Mr. Billson, M.P., 
 containing a prophecy is interesting: "In connection with the property 
 tax under Schedule A the law lays down that land should be charged 
 according to what it produces, and not according to its real value. When 
 this property tax was first put in force about fifty years ago, the condi- 
 tions were somewhat different, and there is now in all our large towns a
 
 200 THE TAXATION OF LAND VALUE 
 
 of the minority report of 1901, Mr. Trevelyan the follow- 
 ing year introduced the "Urban Site Value Rating Bill" 
 in the House of Commons. As the majority reports of the 
 special committees, however, had opposed the new tax, 
 Trevelyan's measure could only meet defeat.^ But the 
 game had been started, and the following year. Dr. Mac- 
 namara presented "A Bill to provide for the Separate 
 Assessment and Rating of Land Values." ^ This bill failed 
 to secure a second reading, although by an adverse major- 
 ity of only thirteen votes.' 
 
 The purpose of the bill, as Dr. Macnamara set forth 
 in the introductory paragraph, was "to give urban au- 
 thorities a new source of revenue in relief of the present 
 rates and so to diminish the existing burdens on building 
 enterprise." The rate was to be one penny in the pound 
 and "to be levied on the capital value of all land, whether 
 occupied or not, as distinct from the value of any build- 
 ings or structures on the land." Again that year, a "Land 
 Valuation Bill " was presented in the House by a Scotch 
 member. It proposed to rate only unoccupied land. But 
 after the first reading the bill was dropped. 
 
 Then more bills followed. In 1904, another "Land Val- 
 ues (Assessment and Rating) Bill" was given a second 
 reading,^ but no further action was taken. This was suc- 
 ceeded, in 1905, by still another bill entitled "Land Values 
 Taxation (Scotland) Bill" which proposed to empower the 
 
 great deal of knd that escapes taxation which ought to bear taxation. 
 Large quantities of land lie idle and produce nothing and consequently 
 such land does not come within the purview of this taxation. And why 
 not? ... I hope that he himself [the Chancellor of the Exchequer] will 
 introduce a very considerable measure for the taxation of land values, but 
 if he does not some Tnore enterprising Chancellor of the Exchequer wiU do so 
 in the future." Pari. Debates (1900), vol. Lxxx, pp. 1247-50. (Italics mine.) 
 
 1 Ibid., (1902), vol. ciii, p. 475. 
 
 * It is significant that David Lloyd George supported this and subse- 
 quent measures to tax land value. 
 
 Ibid., (1903), vol. cxvni, p. 400. 
 I * Ibid., vol. cxxix, p. 480.
 
 THE ENGLISH LAND-VALUE DUTIES 201 
 
 Town Councils of the burghs to impose a tax not exceed- 
 ing two shiUings in the pound on the annual rental of all 
 land. The annual rental, however, was to be calculated 
 at four per cent of the selling price of the land, exclusive 
 of the buildings upon it. It furthermore proposed, diverg- 
 ing in this respect from the preceding bills, that the tax 
 should be deducted by the tenant or lessee who paid it 
 from the lessor or owner, irrespective of the stipulation 
 of existing contracts. As was to be expected, this measure 
 met a fate similar to the preceding ones. Its failure, how- 
 ever, did not deter the partisans of land-value rating from 
 introducing another bill in the same year. The contents 
 of Mr. Brunner's bill were not unlike those of the former 
 measure, except for the stipulation to respect contracts. 
 It provided that only under a lease or agreement made 
 subsequent to the enactment of the bill, was the occupier 
 authorized to deduct the tax from the rental. Then, too, 
 instead of four per cent, three per cent of the capital value 
 was to constitute the annual value for assessment pur- 
 poses.^ Although voted a second reading by a majority of 
 ninety, nothing further was done with the proposal. Mr. 
 Ferguson's measure,^ the "Land Value Assessment (Scot- 
 land) Bill" was presented in the same year and was de- 
 feated. In that year, also a deputation of rating authori- 
 ties waited upon the Prime Minister relative to the matter 
 of site-value rating. 
 
 3. These persistent efforts on the part of the ad- 
 herents of the tax were destined to bear fruit. Thus in 
 
 ^ "Its main object," said Trevelyan, its supporter, "was to make an 
 assessment of the land values of oiu: towns and urban districts, to place 
 upon the rate-book a second column, which would consist of assessments 
 at three per cent of the selling values, and to provide that where the new 
 assessment in the case of any piece of property amounted to a larger sum 
 than the present assessment on the annual value the rate should fall 
 upon that new assessment." Pari. Debates (1905), vol. CXLV, pp. 207-08. 
 
 * The sponsor of this bill, Mr. Ferguson, had been a member of the 
 Select Committee on Town Holdings and had helped draw up the Draft 
 Report from which we quoted above.
 
 202 THE TAXATION OF LAND VALUE 
 
 1906,^ when Mr. Sutherland's "Land Values Taxation 
 (Scotland) Bill" was introduced before a newly elected 
 House, a second reading was voted by a majority, it is note- 
 worthy, of 258, and on April 24, it was committed to the 
 Select Committee for consideration.^ As the findings of 
 this committee were often quoted during the debate on 
 the Finance Act of 1909-10, and throw light on the final 
 enactment of this measure, an analysis of the Committee's 
 report is necessary. In the Draft Special Report submitted 
 to the Committee the disadvantages of the existing order 
 were set forth. It was pointed out that under the system 
 of taxation whereby land and improvements were treated 
 as a unit and that unit was assessed on the basis of its an- 
 nual value, land was kept out of use and undeveloped, so 
 that the supply of land was restricted and its acquisition 
 rendered more difficult and more costly. Furthermore, 
 the system tended to penalize the builder and to prevent 
 the owner from making necessary improvements.' 
 
 Three important problems which occupied the atten- 
 tion of the committee were: (1) the practicability of sep- 
 arate valuation of land and improvements; (2) the cost 
 
 * In the same year two more bills were presented as follows: " Land 
 Values Assessment (Scotland) Bill," by Trevelyan, and "Land Valuation 
 (Scotland) Act 1854 Amendment Bill," by McCrae. See Pari. Debates 
 (1906), vols. CLii and cliv. 
 
 * The thoroughness with which this committee investigated the subject 
 of land- value taxation deserves mention. Data were gathered from many 
 foreign coimtries, while expert, practical men and economists were sum- 
 moned to give evidence. 
 
 * The objections were summarized as follows: 
 
 1. Rating on hypothetical capital value would create inequalities. 
 
 2. Separate taxation of site value is inequitable and impracticable. 
 
 3. Rating on land value would tend inevitably to a curtailment or sup- 
 pression of gardens, and all other open spaces in private ownership. 
 
 4. The scheme interfered with private contract. 
 
 5. It would be a harsh and confiscatory proceeding against the public 
 and private trusts and private investors who had acquired the feu duties 
 simply as a form of investment. 
 
 6. Public credit and financial secvuity would be disturbed. Papers, 
 etc. (Cd. 4845), 1909, p. 53.
 
 THE ENGLISH LAND-VALUE DUTIES 203 
 
 of such valuation; (3) the treatment of existing contracts. 
 As to the question of valuation the evidence was conflict- 
 ing. Expert valuers differed as to the practicability of 
 separate valuations for site and building. The reports of 
 the previous committees that had investigated the ques- 
 tion were quoted and discussed.^ According to Messrs. 
 Moulton and Harper,^ who had testified in 1900, no diffi- 
 culty in separate valuation exists and valuers actually 
 resort to that method in their work.' According to others 
 the difficulty of separate valuation was insuperable. Like- 
 wise there was a difference of opinion as to the probable 
 cost of such valuation. Mr. Harper's estimate was the 
 lowest.* An expert valuation of London County, accord- 
 ing to him, would probably cost 40,000; according to 
 others, such a valuation could not be made for less than 
 a million pounds. In going over this evidence of hypo- 
 thetical estimates, it is significant to note, the Select Com- 
 mittee of 1906 appears to have given little weight to the 
 testimony of officials in other countries, for example, of 
 Mr. Purdy, the Commissioner of Taxation in New York 
 City, and to have neglected the experience of the Austra- 
 lasian and Canadian colonies, where the practicability of 
 separate valuation is no longer in question.^ 
 
 Aside from the subject of valuation, we must point 
 out another serious objection of the Committee to the 
 taxation on land value, namely, the interference with 
 existing contracts. The system of leasehold in England, 
 as is well known, makes this question of contracts a mat- 
 ter of vital importance. Not only are sites leased under 
 the freehold rent charge, the 999-year leasehold, and the 
 
 * Papers Bearing on Land Taxes (CM. 4750), 1909, pp. 258 jf. 
 
 * Mr. Harper is now employed by the Valuation Department as 
 expert valuer in the great task of valuing all the land in the United 
 Kingdom. 
 
 Cf. Cd. 638 (1901), p. 41. * Cd. 638, p. 42. 
 
 * See Papers Bearing on Land Taxes, etc. (Cd. 4750), 1909, and others 
 on The Taxation of Land.
 
 204 THE TAXATION OF LAND VALUE 
 
 99-year systems, but subletting further complicates the 
 situation. Thus it happens that besides the freehold pur- 
 chaser and main lessor, the lessee, sublessee, and occupier 
 may have interests in one piece of property. Obviously, 
 were the new system of taxation adopted, the tax would 
 fall on the lessee or occupier, because the latter had con- 
 tracted to assume the burden of all taxes. Therefore if 
 the purpose of the new system was to be carried out, and 
 the tax made to fall on the owner of the fee simple or les- 
 sor, the contract which made the tenant liable for all 
 charges and taxes would be violated and the rights of 
 the landlord infringed upon. On the one hand, it is argued 
 that such a tax would inflict a hardship upon the owner 
 who probably, at the time when the contract was made, 
 consented to a smaller rent because he was relieved from 
 the tax burden. Moreover, since the lessee, until the ex- 
 piration of the lease, remained the recipient of any in- 
 creases in the income from the land, the exemption from 
 the tax would be a bounty, or an additional profit. On 
 the other hand, it is pointed out that the ground-owner, 
 upon the expiration of the lease, not only receives back 
 his property, but all the improvements made by the lessee; 
 that, also, whenever a renewal of the lease occurs, the 
 landowner exacts a higher rental due to a rise in the value 
 of the land, often, too, as a result of the improvements 
 made by the tenant. It is clear, therefore, aside from any 
 prejudice in the matter,^ why the difficulty in rendering 
 
 ' The position of the Committee, forecasting the vehement opposition 
 that had to be overcome before the enactment of the Finance Act of 
 1909-10, is shown in the following summary of the evidence: "Your 
 Committee cannot but take cognizance of the fact that the principal evi- 
 dence in support of the scheme was that of men of very extreme views, 
 and of predatory, if not altogether confiscatory, opinions in regard to 
 rights of property in land. In the view of such witnesses this new rate 
 is only the beginning of a scheme of expropriation without compensation, 
 whereby the whole burden of local and imperial charges is to be laid 
 upon the owners of one form of property, if, indeed, any rental value at 
 all is to be left to them. In the opinion of your Committee, a scheme.
 
 THE ENGLISH LAND-VALUE DUTIES 205 
 
 justice to the contractual parties under such complexities 
 was made a weighty consideration in the final decision of 
 the Select Committee. 
 
 4. The final recommendations of this Select Com- 
 mittee, as well as the subsequent attempts at legislation, 
 showed that the enactment of rating on land value in face 
 of the opposition of the House of Lords would be impos- 
 sible. In reference to the Land Values Taxation (Scot- 
 land) Bill of 1906, the Select Committee recommended ^ 
 (1) that the bill be dropped, (2) that a substitute measure 
 be introduced making provision for a valuation of the 
 land in the boroughs and counties of Scotland, apart from 
 the buildings and improvements, and (3) that no assess- 
 ment be determined upon until the amount of that valua- 
 tion should be known and considered. Then, in accordance 
 with these recommendations a bill "to provide for the as- 
 certainment of the land values in Scotland " was presented 
 in the House by the Lord Advocate, Mr. Shaw, during 
 the session of 1907. It will be noted that this bill was 
 merely for statistical purposes, not for the taxation of land 
 value; nevertheless, the Opposition was apprehensive of 
 the consequences of the proposed land valuation. The 
 bill passed the House of Commons, only to be defeated in 
 the House of Lords. ^ In the following year another bill 
 bearing the title, "Land Values (Scotland) Bill of 1908," 
 was again favorably voted upon in the House of Commons, 
 but was so amended by the Lords that the government 
 was compelled to drop the bill. This action of the Upper 
 House, of course, only kindled the ire of the pubhc, who 
 
 mainly advocated by persons holding such opinions, must be regarded with 
 suspicion by all who condemn their ultimate aims, not only as contrary 
 to public policy, but as inconsistent with public faith." Cd. 4845, p. 52. 
 From a report submitted by Mr. Remnant. 
 
 1 House of Commons Paper 379 (1906), p. xrv. 
 
 * See Pari. Debates (1907), vols. cXiXxrv, CLXXXi. 
 
 ' Pari. Debates (1907), vol. CLXxxii, pp. 43 ff. As before this bill pro- 
 vided for the assessment in a separate column of the capital value of all 
 the land in Scotland.
 
 206 THE TAXATION OF LAND VALUE 
 
 interpreted it as an undue interference with popular gov- 
 ernment.* 
 
 That this determined opposition of the Lords is in part 
 responsible for the imperial taxation of land value, as em- 
 bodied in the Finance Act of 1909-10, is attested by num- 
 erous utterances of the leaders in power. Thus in 1909, 
 when Lloyd George was upbraided because no reference 
 to the question of valuation had been made in the King's 
 Speech, he repHed: ^ "Well, we have had some experience 
 of trying to carry Valuation Bills through Parliament. 
 We carried a Valuation Bill for Scotland in the House of 
 Commons and sent it to 'another place' but it came to an 
 unfortunate end. We are bearing that in mind. We are 
 considering whether there are not other means of dealing 
 with that great question, especially as it has got mixed up 
 with local and Imperial finance. . . ." The other means re- 
 ferred to were undoubtedly the land-value duties. Incor- 
 porated in the budget, the land-value duties would have 
 to become law. Indeed, the Lords' opposition to this dras- 
 tic reform reached a dramatic climax in that year. It 
 
 * In a speech of October, 1907, Lloyd George said: "The Land Values 
 Bill, which did no more than throw upon the local authorities the single 
 duty of valuing the land apart from the buildings upon its surface was 
 incontinently rejected, and I say this rejection was a piece of arrogance 
 and high-handedness which marks the extreme pretensions of the House 
 of Lords." Quoted in the House of Lords; see Pari. Debates (1908), vol. 
 cxcii, p. 15. 
 
 * Ibid. (1909), vol. i, p. 936. The following quotations express the 
 same thought: "We do not believe that Increment Duty is at all a 
 desirable tax. We supported it when the Budget of 1909-10 was going 
 through on certain definite grounds. It was Uie only means of getting a 
 valuation of the land. Owing to the action of the House of Lords in refusing 
 to pass in tvx) Sessions in succession a fair valuation bill we had to get our 
 valuation of the land of the country via the Finance Act of 1909-10." (From 
 a speech by Mr. Wedgewood, M.P. Ibid. (1913), vol. l, p. 176.) "Land 
 reformers believed that a valuation had been accomplished, a value 
 apart from the buildings and improvements upon land by which they 
 would finally be enabled to secure a basis for rating and taxation fairer 
 and more just than the basis upon which our rating and taxation now depend." 
 Quoted from a speech by the Lord Advocate, A. Ure. Ibid., vol. lvi, p. 404. 
 (Italics mine.)
 
 THE ENGLISH LAND-VALUE DUTIES 207 
 
 meant capitulation to the measure insuring a valuation of 
 the land, or the dissolution of the House of Lords. ^ In 
 such circumstances the Lords gave way, and thus the 
 Finance Bill of 1909-10, providing for the taxation of land 
 value, was finally enacted. 
 
 5. Having traced the development of the principle 
 of taxing land value as a fiscal poHcy, evolved from the 
 needs of the local governments, we have yet to discover 
 the other motives which made the budget acceptable in 
 1909-10. The time was ripe for the reform, and the mo- 
 tive existed to set the latent forces free. The budget pro- 
 posal, in fact, was of a piece with the general poUcy of 
 social legislation of the administration. The party in 
 power was pledged to a number of progressive measures 
 which it most conscientiously strove to carry out. Old- 
 age pensions, insurance against invaUdity, accident and 
 unemployment, labor exchanges, home rule for Ireland, 
 were on the board; likewise, the taxation of land value. 
 
 Certainly for the unusual proposals in Part I of the Bud- 
 get, the fiscal exigencies that is, the increased expendi- 
 ture needed for the navy and old-age pensions are not 
 a suflBcient explanation.^ Indeed, the charge of the Op- 
 position that Lloyd George favored the taxes on land 
 value because he was "bitten with certain theories" can- 
 not be repudiated. They pointed out with reason that 
 the estimated yield of the tax was too insignificant to 
 be fiscally justifiable.' Furthermore, when we find some 
 Cabinet Ministers* pledged to the cause of the new 
 
 1 Cf. Pari Debates (1908), vol. cxcn, pp. 14, 15. 
 
 * Cf. Lloyd George's Budget Speech, ibid. (1909), vol. iv, pp. 477, 500. 
 If it had been a measure of fiscal exigency the tax should have been re- 
 pealed in 1911-12, when there was a siuplus revenue. 
 
 Cf. ibid., vol. IV, p. 758. 
 
 * The Lord Advocate, Mr. Ure, was honorary vice-president of the 
 Scottish League for the Taxation of Land Values; the Secretary of the 
 Navy, Mr. Haldane, is said to have been a member of the Single Tax 
 League. Cf. ibid., vol. vi, pp. 79, 85. Moreover, Asquith, Lloyd George, 
 and Ure had always supported the land^value measures that bad previ- 
 ously been presented in Parliament.
 
 208 THE TAXATION OF LAND VALUE 
 
 taxes, it is not to be wondered at that this plank in the 
 platform was inserted in the Finance Bill, where it had 
 a better likelihood of enactment.^ And this coup d* Uat 
 succeeded. 
 
 Again, the form of the tax, or rather taxes, disproves 
 their alleged fiscal character. This becomes evident if we 
 compare the English duties with the local land taxes in 
 Australasia or Canada. In the latter countries, taxation 
 on the basis of capital value was the natural outgrowth 
 of conditions;'^ and land- value taxation was there adopted, 
 because, for local purposes, it was found most expedient 
 fiscally. The English duties, on the other hand, like the 
 increment taxes of Germany and the Australasian pro- 
 gressive land taxes, were enacted for other than fiscal rea- 
 sons. Moreover, of all the forms of land-value taxation in 
 operation, the English system bears the most studied 
 character. It is a combination of the tax on selling value 
 and the tax on value increment, adapted to the peculiar 
 conditions of Great Britain. But the discriminatory fea- 
 ture of the English land-value duties confirms the charge 
 of the Opposition that not fiscal need, but antagonism to 
 the unpopular landowning class to whom the increments 
 from the appreciation in the value of the land accrue, is 
 responsible for the measure. 
 
 And because the tax was a transplanted system, so to 
 speak, and the deeply-rooted principle of private property 
 rights was felt to be infringed upon, the controversy in 
 England was vehement and prolonged. In the debates in 
 Parliament the bone of contention appears to have been 
 the proposed substitution of capital for annual value assess- 
 ment and the valuation of the land which this involved. 
 From the vehemence of the Opposition, the extent to 
 which the interests of the landlords were felt to be at 
 
 * It was well understood that the House of Lords could not reject the 
 Finance Bill with impunity; this later events demonstrated. 
 
 See supra, chapter n, 6; also infra, chapter vi, 1.
 
 THE ENGLISH LAND- VALUE DUTIES 209 
 
 stake, and the extent to which their burden of taxation 
 and rating had hitherto been evaded, now became appar- 
 ent. The apprehension with regard to the valuation, how- 
 ever, was chiefly confined to the landowners in England. 
 In Scotland, where annual valuation had existed since 
 1854, the valuation of the land apart from the buildings 
 was in general regarded with favor. ^ In England, the 
 unprecedented character of the reform aroused the sever- 
 est disapproval. The duties were regarded by the Oppo- 
 sition as a confiscatory measure. '^ "This Undeveloped 
 Land Duty," said Mr. Everett in the House of Commons,' 
 "is a very remarkable one; it is the greatest innovation of 
 all the Land Taxes proposed, and it excites a great deal 
 of apprehension in the minds of many. It is quite excep- 
 tional and unprecedented in its character. . . ." Equally 
 novel appeared the duty on value increment, which was 
 modeled after the German "Zuwachssteuer," * and the 
 reversion duty, which, though resembling the increment 
 duty, was clearly adapted to the English leasehold sys- 
 tem. As for the mineral-rights duty, so impractical and 
 impossible did the valuation of undeveloped, unopened 
 mines appear that the original proposal to tax mineral 
 land was abandoned, as we shall see,^ and a new method 
 
 * "For twenty years back in seven of the counties of Scotland, the rent 
 and the consequent rate had been fixed upon the valuation of the land 
 apart from the buildings and improvements upon the land. In all these 
 counties where the custom was for the tenant to erect buildings and make 
 improvements there was no rent charged upon them, and there was a 
 valuation every year of land alone apart . , . with regard to urban dis- 
 tricts ... for upwards of half a century it had been the regular practice 
 in Scotland to make the valuation of land and buildings separately." 
 From a speech by Mr. Ure. Cj. Pari. Debates (1908), vol. clxxxiv, pp. 
 891-92. 
 
 * Cf. ibid. (1909), vol. iv, pp. 811, 909; vol. vi, p. 110, 
 
 * Ibid., vol. XII, p. 516. 
 
 * Lloyd George, prior to the presentation of the budget in the House, 
 had himself traveled through Germany to investigate the subject at first 
 hand. See ibid., vol. rv, p. 1758. 
 
 InfTa, 11.
 
 210 THE TAXATION OF LAND VALUE 
 
 substituted. Nevertheless, in spite of the severe contro- 
 versy which the duties aroused, these "fantastic propos- 
 als which were so alarming the country" ^ became law. 
 
 6. Turning to the analysis of the land-value duties, 
 it is necessary to point out that many of the clauses admit 
 of various interpretations. It is, indeed, agreed among 
 legal authorities that the bill was badly framed,^ and it 
 has given no end of difficulty to the courts which must 
 interpret its meaning. The full title of the Finance Act 
 (the "statute with a barbarous name," ' as it has been 
 called by a "truculent King's Counsel") reads as follows: 
 "A Bill to Grant Certain Duties of Customs and Inland 
 Revenue (including excise), to alter other Duties and to 
 amend the Law relating to Customs and Inland Revenue 
 (including excise) and to make other financial Provisions." 
 Thus, not only did the government incorporate a social 
 reform measure in a comprehensive fiscal proposal, but 
 it consigned the first part * of the Act to the fiscally unim- 
 portant land-value duties. It is this part that will here be 
 examined. 
 
 The English system of taxing land value is complex, 
 embracing not one tax but four dififerent ones; namely, 
 (1) the value-increment duty, (2) the reversion duty, (3) 
 the undeveloped-land duty, and (4) the mineral-rights 
 duty. The first two are indirect levies, the last two are 
 annual, direct taxes. In the following sections we shall 
 attempt to interpret these several duties in the light of 
 recent court decisions, to explain the system of valuation 
 
 Pari Debates (1909), vol. iv, p. 1779. 
 
 * Cf. Napier, " The Valuation Scheme of the Land Clauses of the Fi- 
 nance Act " (1910), in the Law Quarterly Review (1911), vol. xxvii, pp. 
 441 Jf . Cf. also Cox-Sinclair and Hynes, " Some Problems in Land Val- 
 ues," in Law Magazine and Review (1912-13), vol. xxxviii, pp. 336 jf. 
 
 * Law Quarterly Review (1912) vol. xxvni, pp. 320-21. 
 
 * Part I has the following subdivisions: (1) Increment- Value Duty, (2) 
 Reversion Duty, (3) Undeveloped-Land Duty, (4) Mineral-Rights 
 Duty, (5) Valuation for Purposes of the Duties, (6) Appeals and Sup- 
 plemental Clauses.
 
 THE ENGLISH LAND-VALUE DUTIES 211 
 
 of all the land in the United Kingdom as provided for in 
 the Act, and to describe the administrative features of the 
 new taxes. 
 
 7. The value-increment duty ^ is a tax of twenty per 
 cent of the increase in the site value of the land, calculated 
 from the "original site value" on April 30, 1909. The occa- 
 sions for the payment of the duty are as follows : ^ 
 
 (a) Whenever the land or any interest in the land shall 
 be sold. 
 
 (6) When land shall be leased for a period exceeding 
 fourteen years. 
 
 (c) In case of the transfer of land on death. 
 
 (d) On April 5, 1914, and in every subsequent fifteenth 
 year, on land held by bodies corporate or unincorporate. 
 
 The next important consideration is how to ascertain 
 the value increment. The Act defines value increment as 
 "the amount (if any) by which the site value of the land 
 on the occasion on which increment-value duty is to be 
 collected . . . exceeds the original site value of the land." ' 
 This original site value is to be determined by making a 
 valuation of all the land, and the value is to be estimated 
 as on April 30, 1909. 
 
 To ascertain the site value the Act defines four values, 
 the total, the gross, the full site, and the assessable site 
 values. This classification, it is agreed,* unnecessarily 
 complicates the system of valuation and assessment. 
 Reduced to its simplest terms, the site or assessable value 
 may be defined as the value which the "fee simple of the 
 land, if sold at the time in the open market by a willing 
 seller in its then condition, free from incumbrances, and 
 
 * It is significant that the proposal to change Section I to read "un- 
 earned increment" was voted down in Committee. See Pari. Debates 
 (1909), vol. VI, pp. 1484-87. 
 
 House of Commons Bill 144 (1910), 1. 
 Ibid., 2. 
 
 * Cf. Solicitors' Journal, vol. lv, p. 736; also Cox-Sinclair, op. cii., 
 p.S4a
 
 812 THE TAXATION OF LAND VALUE 
 
 from any burden, charge, or restriction ^ (other than rates 
 or taxes) might be expected to realize," after deducting: 
 
 (a) The amount of any buildings and of any other 
 structures, including fixed machinery, all growing timber, 
 fruit trees, fruit bushes, etc. 
 
 (6) The total value of the expenditures incurred for im- 
 provements, such as drainage, leveling, advertisements, 
 etc. 
 
 (c) The value added to the land by dedication of neigh- 
 borhood land as squares, gardens, roads, open spaces for 
 the use of the public. 
 
 (d) The value attributable to expenditure on the re- 
 demption of any land tax, fixed charges, enfranchisement 
 of land previously of copyhold tenure, or attributable to 
 "goodwill," etc.2 
 
 Comparing the value-increment duty with the German 
 system, it is to be noted: 
 
 First, as regards the occasions of levy, while the Ger- 
 man tax is collectible only on the occasion of a sale of the 
 land, the English law adds the transfer by lease, death, 
 
 * Bill 144, 25. " The amount by which the value would be diminished if 
 the land were sold subject to any fixed charges and to any public rights of 
 way or any public rights of user, and to any right of common and to any 
 easements aflfecting the land, and to any covenant or agreement restricting 
 the use of the land entered into or made before the thirtieth day of April, 
 1909, and to any covenant or agreement restricting the use of the land 
 entered into or made on, or after that date." 
 
 * We have attempted to simplify the definitions of values used in the 
 Act, which have been called a " verbal juggle. " The Act provides for the 
 separate valuation of the total and assessable site values. To ascertain 
 these, a roundabout method is provided for: thus the assessable site 
 value is obtained by making certain deductions from the total value, 
 which is itself the gross value less burdens, charges, restrictions. Accord- 
 ing to the Act, 25 (4), however, the assessable value of land means the 
 total value after deducting: " (a) the same amount as is to be deducted 
 for purposes of arriving at full site value from gross value," etc. This 
 necessitates the ascertainment of gross value and full site value. The 
 result of this method of valuation has been sometimes very anomalous 
 values, for example, minus values. Cf. Solicitors' Journal, vol. lvi, pp. 
 478/. Cf. also infra, 12.
 
 THE ENGLISH LAND-VALUE DUTIES 213 
 
 and in case of corporations, a periodic occasion of fifteen 
 years. This last occasion for the collection of value incre- 
 ment is explainable by reason of the fact that a corporation 
 has legally a permanent existence. The arbitrary period 
 of fifteen years is therefore substituted for the occasion of 
 the passing of land on death. While, then, the German 
 government contents itself with sharing the increment 
 whenever the profit actually accrues to the landowner, 
 the English government demands a share of the increment 
 on all occasions of transfer, whether the increment has 
 actually accrued to the owner, or is only potentially realiz- 
 able. 
 
 Secondly, the method of ascertaining the value incre- 
 ment is different. In the German system the actual selling 
 prices constitute the basis of computation; in the English 
 system, a hypothetical, fictitious value is the basis. ^ It is 
 true that the latter is in closer accordance with the princi- 
 ple of the tax, that only the increment attributable to 
 influences affecting the value of the site irrespective of the 
 improvements should be taxable.'' The German system, 
 however, even though lacking in accuracy from the stand- 
 point of principle, is simpler in administration and more 
 practicable. 
 
 Thirdly, the English tax, which takes from the land- 
 owner one-fifth of the value increment accruing since 
 1909, is neither retroactive, nor progressive, as is the 
 German imperial tax. Only the future increments will be 
 made subject to duty. That this is fiscally less expedient 
 has abeady been pointed out in the case of the Cologne 
 ordinance.' First, the revenue from the value-increment 
 duty must be trifling for a number of years to come; sec- 
 
 ^ It is held that the valuation provisions are applicable to the ascer- 
 tainment of the occasional as well as the original site values. CJ. Solid- 
 tors' Journal, vol. lv, pp. 717, 710. 
 
 ' We have, indeed, seen that in some cases the Grennan " ZuwaduH 
 steuer" is a realty, not a land-value tax. CJ. supra, pp. 150-51. 
 
 * See supra, chapter iv, 18.
 
 214 THE TAXATION OF LAND VALUE 
 
 ondly, the expense of the valuation for the original site 
 value has already been enormous.^ 
 
 Fourthly, as under some of the German local measures, 
 a remission of ten per cent of the original site value is 
 allowed under the English system, on the first occasion for 
 the collection of increment duty; and a remission of an 
 equal amount of the site value on the last preceding occa- 
 sion for the collection, on any subsequent occasion for the 
 collection of duty; with this proviso, "no remission shall 
 be given on any occasion which will make the amount of 
 the increment value on which duty has been remitted dur- 
 ing the preceding five years exceed twenty-five per cent of 
 the site value of the land on the last occasion for the collec- 
 tion of increment-value duty prior to the commencement 
 of that period or of the original site value if there has been 
 no such occasion." * Thus, in order to be taxable the 
 value increment must constitute at least ten per cent of the 
 previous site value; and then it is only the excess over the 
 ten per cent that is taxable. ' 
 
 Fifthly, like its German prototype, the value-increment 
 duty is a stamp duty and is deemed paid when the govern- 
 
 * Of course, as we have shown, the valuation of all the land in the 
 United Kingdom was to serve another purpose than the administration 
 of the value-increment duty. See supra, p. 206 and footnotes. 
 
 ' An illustration will make this complicated wording clear. A piece 
 of land whose original site value, i.e., on April 80, 1909, let us suppose, 
 was 600 is sold in 1911 for 660. Since the value increment does not 
 exceed ten per cent of the original site value, no tax is payable. Suppose, 
 now, it is sold again in 1914 for 726. Again, because the excess over the 
 previous selling price is only 66 or just ten per cent, no tax will be im- 
 posed. Now, should this piece of land be again sold in 1916 for 800, the 
 value-increment duty will not be charged on the 74, the difference in 
 value since the last occasion in 1914; but on the difference between the 
 original site value, 600, and the 800, for the amount of the value in- 
 crement on which duty had been remitted during the preceding five 
 years exceeds twenty-five per cent of the original site value. However, 
 as a remission of twenty-five per cent is allowed in this case, the taxable 
 value increment will be only 50. Twenty per cent will give a tax of 
 10. Cf. Napier, The New Land Taxes, pp. 13/. 
 
 C/, Bill 144, (1910), 3.
 
 THE ENGLISH LAND-VALUE DUTIES 215 
 
 ment stamp has been attached to the deed at the time of 
 transfer.^ 
 
 Sixthly, following the German precedent again, the Eng- 
 lish Act provides that, if it can be proved to the Commis- 
 sioners that the site value of a piece of land at any time 
 within twenty years prior to April 30, 1909, exceeded the 
 original site value as ascertained under the Act, that higher 
 value shall be substituted for the original site value. It will 
 readily be seen that it is in the interest of the person subject 
 to the value-increment duty to have the original site value 
 as high as possible, unless this person be likewise subject 
 to the undeveloped land duty.^ 
 
 Seventhly, difficult as it is to determine the incidence 
 of the tax, the English law nevertheless stipulates, as do 
 the German laws, that the tax shall be paid by the trans- 
 feror or lessor, and in case of a sale by the seller.' It would 
 seem therefore that the conflicting interests of seller and 
 purchaser with regard to the value of the land will tend to 
 the registration of the actual value of the land and will 
 tend to prevent fraud. For it is to the advantage of the 
 seller to have the original site value estimated as high as 
 possible, and the selling price as low as possible, so that 
 the difference may be less. On the other hand, it is to the 
 interest of the purchaser to have the selling value as- 
 sessed as high as possible, so that the difference between 
 that value and the value at a future transfer may be less. 
 
 Eighthly, a notable departure from the German practice 
 is the exemption of agricultural and small holdings from 
 value-increment duty. 
 
 The following are exempt: 
 
 (1) Agricultural land, or rather land whose market value 
 does not exceed the average value of land used for agricul- 
 tural purposes.^ For example, if a parcel of land used for 
 
 1 Cf. BiU 144 (1910), 3. * Ihid., 2. See infra, 9. lUd., 4. 
 * lUd., 7. The chief reason for exempting agricultural land is that 
 the value of rural land in England has on the whole depreciated.
 
 216 THE TAXATION OF LAND VALUE 
 
 agricultural purposes could bring a higher value if sold for 
 building purposes, the exemption would not apply. 
 
 (2) Small properties occupied by the owner, provided:^ 
 
 (a) the house is situated in the County of London 
 and has an annual value not exceeding 40 
 (as determined for Income Tax, Schedule A); 
 or, 
 
 (6) the house is situated in a borough or urban dis- 
 trict of 50,000 population or upward and has an 
 annual value not exceeding 26; or, 
 
 (c) the house is situated elsewhere and has an an- 
 nual value not exceeding 16; or, 
 
 (d) the land is used for agriculture and does not 
 exceed 50 acres, ^ whose average total value does 
 not exceed 25 per acre. 
 
 Other exemptions are: 
 
 (3) Any land owned by a corporate or unincorporate 
 body which receives no dividends or profits out of the 
 revenue, but uses the land for games and other recreational 
 purposes." 
 
 (4) Land held by any department of government, or by 
 or for the king. This does not obviate the valuation of 
 Crown lands, for, to facilitate future transfers, increment 
 duty owing on such land is assessed and deemed to have 
 been paid.* 
 
 The further discussion of the value-increment duty must 
 be reserved for later sections under the administration and 
 working of the tax. We shall find that peculiar diflSculties 
 in administration have arisen, because the law was framed 
 
 1 Cf. BUI 144 (1910), 8. 
 
 * The owner must be resident on the land and the total amount owned 
 by him must not exceed fifty acres. The exemption is not applicable to 
 any land together with a dwelling house when the annual value of the 
 house exceeds 30. See ibid., 8. 
 
 Ibid., 9. 
 
 * Ibid., 10.
 
 THE ENGUSH LAND-VALUE DUTIES 217 
 
 in accordance with the theory of the tax, not in accordance 
 with experience.^ 
 
 8 The adaptation of the principle of the tax on value 
 increment to leasehold property is characteristically Eng- 
 lish, for it is in England that the leasehold system is very 
 widely developed. The Act provides that, on the expira- 
 tion of a lease of land, reversion duty shall be charged at 
 the rate of one pound for every complete ten pounds of 
 the value of the benefit accruing to the lessor, by reason of 
 the determination of the lease.* At first sight the rever- 
 sion duty would seem to be a value-increment duty collec- 
 tible on another occasion than those mentioned, that is, on 
 the expiration of a lease. But in principle and method of 
 assessment the two are distinct taxes and should be differ- 
 entiated from each other. To illustrate: a landowner, 
 without making any outlays, leases his land to a tenant for 
 a term of years, frequently on a ninety-nine year lease. 
 The tenant improves the property by erecting a building 
 and otherwise, assumes all risks, pays all taxes, and at the 
 expiration of the lease, the property, including improve- 
 ments, reverts to the landowner. Such being the usual 
 case, it is argued, as in the case of the value-increment 
 duty, that to appropriate ten per cent of this "unearned" 
 value in behalf of the government creates no hardship 
 upon the owner of the fee simple.' 
 
 This reasoning has been attacked on several grounds. 
 Unlike the duty on value increment, the reversion duty 
 is not only retroactive, but is an infringement of the right 
 of free contract. To illustrate this contention, assume that 
 a person owns a parcel of land which his father had leased 
 to a builder for a period of eighty years for a ground rent 
 of 20 annually, plus a sum of 300, as a premium in con- 
 sideration of the lease. At the expiration of the lease in 
 1912, the landowner recovers the house and lot. Assume 
 
 1 See infra, H, 13. * Bill 144 (1910), 10. 
 
 Pari. Debates (1909), vol. xn, pp. 369/.; vol. iv, p. 640.
 
 218 THE TAXATION OF LAND VALUE 
 
 further that the total value of the land, buildings, fixtures, 
 etc., at the termination of the lease was 2000. Deducting 
 from this amount the value of the consideration paid at 
 the time of the original grant of the lease, namely 300, 
 plus the capitalized rental at twenty-five years purchase, 
 500, the lessor profits by a value increment of 1200. 
 Reversion duty on this sum at ten per cent equals 120. 
 Suppose, now, the opponents of the tax argue, that the 
 20 rental was not a rack rent; suppose that the rental 
 charged was somewhat less by virtue of the expenditure 
 incurred by the lessee, the landlord counting on the in- 
 creased value because of the improvements and the ex- 
 pected reversion; is it right to disappoint his expectations 
 by levying this retroactive tax? Suppose, too, that the 
 rental was less because of a certain stipulation in the con- 
 tract as to the amount of expenditure the lessee was to 
 incur; is it not an interference with the right of contract, 
 to levy this tax on a false assumption that the rental 
 charged always represents a rack rent? ^ 
 
 To meet such arguments and to avoid any possible hard- 
 ships, the government has granted concessions to the Oppo- 
 sition, which invahdate the objections to a great extent. 
 First, it is provided,^ that in computing the value of the 
 benefit accruing to the lessor, any value attributable to 
 any works executed or outlays incurred by the lessor, 
 as well as any compensation payable by him to the lessee 
 on the termination of the lease shall be deducted from the 
 total value. Secondly, the value of the land at the time 
 of the original grant of the lease shall be ascertained on the 
 basis of the rent paid and the payments made in consider- 
 ation of the lease; and when a nominal rent has been 
 charged the tenant, the value of "any covenant or under- 
 taking to erect buildings or to expend any sums upon the 
 property" shall be taken into consideration in calculating 
 
 Cf. Pari. Debates (1909), vol. vi, pp. 79, 80; vol. xn, pp. 371/. 
 Bill 144 (1910), 13 (2).
 
 THE ENGLISH LAND-VALUE DUTIES 219 
 
 the value of the land at the time of the original grant of the 
 lease.* In regard to lessors who are themselves entitled 
 only to a leasehold interest in the land, the value of the 
 benefit accruing on the termination of a lease shall be re- 
 duced in proportion to the amount by which their interest 
 is less than the value of the fee simple. 
 
 Again, in view of the Uberal exemptions from reversion 
 duty, the objection to the retroactive feature of the tax 
 loses weight. These exemptions, however they may limit the 
 fiscal efficacy of the tax, are in accordance with the govern- 
 ment's general policy as regards leaseholds. Exempt are: ^ 
 
 (a) Any reversion in case of a lease made prior to April 
 SO, 1909, which determines within forty years of the date 
 of purchase. 
 
 (b) Any reversion of land which on the expiration of the 
 lease is agricultural land. 
 
 (c) Any reversion in case of a lease, the original term of 
 which did not exceed twenty-one years. 
 
 We may take note also of the following provision of 
 partial exemption: In case of a reversion before the term 
 of the lease expires, and in case the lessee is granted a new 
 lease for a term extending at least twenty-one years be- 
 yond the date on which the original lease would have 
 expired, an allowance of two and one-half per cent of the 
 duty shall be granted for every year of the original term 
 of the unexpired lease from the time the lease is determined. 
 This allowance shall be treated as if it had been paid, pro- 
 vided that the exemption shall not exceed fifty per cent 
 of the whole duty payable.' 
 
 * The decision in the Camden case makes this provision practically 
 superfluous and renders evasion of part of the tax easy. The House of 
 Lords confirmed the judgment of the Court of Appeal against the gov- 
 ernment, holding that the value of the building, 6000, was to be con- 
 sidered in the rental. The government held that the 125 rental agreed 
 upon at the time of the grant of the lease in 1824 was not a nominal rent 
 merely. Cf. Solicitors' Journal, vol. LVin, p. 717. 
 
 Bill 144 (1910), 14. 
 
 Ibid.. 14 (3). Repealed in 1911. Cf. Revenue Bill (1911), 8.
 
 220 THE TAXATION OF LAND VALUE 
 
 It is necessary to point out the reasoning upon which 
 these exemptions are based. First, short lease contracts 
 are to be exempted, because the lessor in such cases cannot 
 demand so high a rental as for a long-term lease, in view 
 of the improvements to be made by the lessee which will 
 ultimately revert to the lessor. In other words, in granting 
 a short-term lease the rental will be less in consideration 
 of the outlays to be incurred by the lessee. On the other 
 hand, in granting a long-term lease, as for a period of 
 forty years or over, the owner, it is assumed, has in mind 
 a permanent income and does not anticipate the enhanced 
 value of the property which may ultimately revert to him. 
 Such an enhanced value is in the nature of a "windfall," 
 and to appropriate a share of it will not disappoint the 
 expectations of the ground-owner. The distinction drawn 
 between short- and long-term leases is for the purpose of 
 discouraging the latter and to facilitate the frequent re- 
 newal of leases. That short-term leases, under which the 
 lessee is apt to get more favorable treatment, are desirable 
 seems to have been the sentiment of both political parties.^ 
 
 Further exemptions from reversion duty are the follow- 
 ing: 
 
 (d) Mining leases.^ 
 
 (e) Where the reversioner is a rating authority.' 
 (/) Where reversion is held for charitable purposes. 
 
 (g) Where reversion is held by a statutory company for 
 
 * In his budget speech Lloyd George argued that the exemption of 
 short-term leases from reversion duty would have the desired effect: "I 
 propose to make a special abatement of duty proportionate to the unex- 
 pired period of the original lease which is surrendered and have great 
 hopes that this allowance, coupled with the fact that the value of the re- 
 version for the purpose of duty, will be calculated upon the difference 
 between the consideration for the old and the consideration for the new 
 lease, will induce owners to grant renewals more readily and upon more 
 favorable terms than at present, and so tend to remove one of the most 
 mischievous effects of the leasehold system." Pari. Debates (1909), vol. iv, 
 p. 541. 
 
 * Bill 144 (1910), 22 (1). Under certain conditions. Cf. infra, p. 283. 
 Ibid., 36.
 
 THE ENGLISH LAND-VALUE DUTIES 221 
 
 the purposes of its undertaking and cannot be appropri- 
 ated except for those purposes.^ 
 
 As in the case of the vahie-increraent duty, so with re- 
 gard to reversion duty, the ambiguous wording of the 
 clause has given rise to difficulties in legal construction and 
 has been held up to criticism, if not ridicule, by legal au- 
 thorities.'^ The clause in question reads: "On the deter- 
 mination of any lease of land there shall be charged ... on 
 the value of the benefit accruing to the lessor by reason of 
 the determination of the lease, a duty, called reversion 
 duty, at the rate of one pound for every complete ten 
 pounds of that value." ' Now, it is argued that a lease can 
 expire, not alone by lapse of time, but by merger through a 
 release or surrender of lease, etc. Suppose the lessee in the 
 illustration given above, after making the improvements, 
 had purchased the leasehold of the ground-owner, would 
 not a benefit have accrued to the latter on the determina- 
 tion of the lease.'* And in accordance with the wording of 
 the clause, should he not be liable for reversion duty? 
 Again, it has been argued ingeniously, that the words 
 "benefit" and "by reason of the determination" are am- 
 biguous, that a benefit arising from a merger accrues by the 
 sale, not by reason of the conveyance which reversion im- 
 plies; hence the determination of the lease does not give 
 rise to the benefit.* A further objection is the possibility 
 of evading the payment of reversion duty by avoiding a 
 
 ^ Bill 144 (1910), S8. A statutory company is a quasi-public com- 
 pany incorporated under a Sp>ecial Act. C/. Report of Commissioners of 
 Inland Revenue, 1911 (Cd. 5833), p. 151. 
 
 ' Solicitors' Journal, vol. Lv, pp. 104 Jf. 
 
 Bill 144 (1910), 13. 
 
 * It has been pointed out, however, that the merger involves the deter- 
 mination of the lease, and gives rise to a benefit, for the value of the free- 
 hold, when the lease expires, exceeds the value of the lease and reversion. 
 In other words there is a "dormant" value which the determination of 
 the lease confers on the owner. "During the existence of the lease neither 
 lessee nor lessor can deal with the property to the same advantage as if 
 it were free from lease." Cf. Solicitors' Journal, vol. LV, p. 105.
 
 222 THE TAXATION OF LAND VALUE 
 
 merger. Thus, by assigning the lease to a trustee for the 
 lessee, until the renewal of the lease is effected, the estate 
 would not revert to the owner at all and no duty would 
 be collectible.^ The objections, however, are for the most 
 part legal quibbles and do not affect the administration of 
 the duty. 
 
 It is necessary to point out that when the lease expires 
 by sale, value-increment duty, as well as reversion duty, 
 is collectible. But to provide against the payment of double 
 duty it is stipulated that, when value-increment duty has 
 been paid, no reversion duty shall be charged on the same 
 property at the same time, and vice versa.^ Furthermore, 
 whether the ground-owner actually realizes a sum of money 
 on the determination of the lease is immaterial; the im- 
 portant thing is that the property shall have a higher value 
 than at the time of the grant. The possibility of evasion 
 of the duty has been much discussed and has led to the 
 amendment of some of its provisions. 
 
 In regard to the rate of the tax, it is worthy of note that 
 the reversion duty is at the rate of ten per cent, or one-half 
 the rate of the value-increment duty. When, however, it 
 is considered that reversion duty is a retroactive tax and 
 that no minimum exemption is allowed as in the case of 
 value-increment duty, the discrepancy is after all slight. 
 
 9. The duties thus far considered are both indirect 
 levies; the others, comprising the land-value duties, the 
 undeveloped land and mineral-right duties, are direct 
 taxes. The undeveloped land duty is a charge of one-half 
 penny in the pound on the value of unimproved land. 
 It is an annual tax on capital value. What constitutes 
 undeveloped land, the following definition will make clear: 
 "For the purpose of this Part of this Act, land shall be 
 
 * Cf. Solicitors' Journal, vol. LV, pp. 105-06. 
 
 ' "The difficulty of determining, say on death in 19S0, how much 
 value increment had been included in the taxation in 1920 of benefits ac- 
 cruing by reason of the determination of a lease, is a little appalling." 
 Napier, The New Land Taxes, p. lii.
 
 THE ENGLISH LAND-VALUE DUTIES 223 
 
 deemed to be undeveloped land, if it has not been de- 
 veloped by the erection of dwelling houses or of buildings 
 for the purposes of any business, trade, or industry other 
 than agriculture (but including glass-houses or green 
 houses), or is not otherwise used bona fide for any business, 
 trade or industry other than agriculture. . . ." ^ 
 
 In instituting this direct tax on unimproved land the 
 aim was to correct a social ill pecuhar to most urban 
 communities, rather than to tap a new source of revenue. 
 The minority reports of the different select committees 
 that had investigated the subject had called attention to 
 the aggravation of congestion in cities arising from the 
 fact that land was being kept out of use and held for spec- 
 ulative purposes. This was the grievance to which the 
 Chancellor of the Exchequer pointed when he said: * 
 "There are millions of acres in this country which are more 
 stripped and sterile than they were, and providing a living 
 for fewer people than they did even a thousand years 
 ago." It was hoped that even a slight tax on non-income- 
 bearing land would induce utilization of the land, a result 
 much to be desired. 
 
 What then could be the objection to such a small 
 charge on land? The fundamental objection raised against 
 the undeveloped land duty was one of principle. This was 
 the first time that a direct, i.e., annual, tax on capital 
 value was imposed, a most discriminatory tax. First, 
 therefore, the establishment of a precedent was regarded 
 with serious apprehension. Secondly, the taxation of non- 
 income-bearing land seemed contrary to the established 
 principles of taxation. Receiving no income, wherewith 
 was the owner to pay the duty? "It is a tax not upon 
 annual value, as all other rates and taxes to which we are 
 accustomed are, but it is a tax upon capital value, and 
 it differs from all the other Land Taxes in that it is an 
 annual charge. It is not a charge once and for all as the 
 
 1 Bill 144 (1910), 16. * Pari. Debates (1909), vol. iv, p. 490.
 
 ItU THE TAXATION, OF LAND VALUE 
 
 Increment Taxes, but an annual charge upon capital value. 
 It is a tax laid on without there being any money in hand 
 out of which to pay it. . . . But in this case the tax is to be 
 laid on annually on individuals who are receiving nothing 
 and have not the wherewithal to find money unless they 
 sell the land or draw it from some other source." ^ 
 
 Other objections to the duty on undeveloped land were 
 raised. Thus the question was discussed in Committee as 
 to the possibility of judging of the ripeness of vacant land 
 for building purposes. On the one hand, it was ques- 
 tioned whether land was kept out of use for other reasons 
 than that its improvement was at the time unprofitable. 
 A tax on such land would compel the owner to make im- 
 
 * From a speech by Mr. Everett, M.P,, Pari. Debates (1909), vol. xii, 
 p. 516. Whether the new tax actually entails hardships cannot be deter- 
 mined from isolated instances, nevertheless the following cases, occurring 
 after a three years' experience with the undeveloped land duty, cited 
 by the Earl of Camperdown in the House of Lords should be noted: " The 
 Undeveloped Land Duty is, I think, the heaviest and the most unjust 
 of all the land taxes under the Budget of 1909-10. Undeveloped land 
 duty is imposed on the difference between the value of the land for agri- 
 cultural purposes and the assessable site value of the same land. ... In 
 saying that this duty amounts to 50 per cent or upwards of the highest 
 income obtainable at the present time, I have put it at a very moderate 
 figure, because in a great many cases it amounts to a great deal more 
 than 100 per cent. . . . Here is one case. It concerns three acres of land. 
 The present income is 7 10s., the capital value on which duty is assessed 
 is 2490, and the amount of the duty is 5 4s. As against 7 10s. income 
 the owner has to pay 5 4s. duty, and it is calculated that in fifteen years 
 that land may be developed. That is not the only hardship, because five 
 years hence this land will be revalued. It may not have been developed, 
 . . . indeed, the valuer does not expect that it will be developed for fif- 
 teen years . . . but at that time the capital value may be considerably in- 
 creased, and therefore the duty payable would be also considerably in- 
 creased. The owner of this property has to pay 5 4s. in duty out of an 
 income of 7 10s. until such time as the land is developed, and when it is 
 developed, if it is found to be of a higher value than it is assessed at 
 if the owner receives more for the land than it is assessed at at the end 
 of those fifteen years he will be liable to Increment Duty on the differ- 
 ence." Another case cited by the Earl was of a duty of 20 levied on land 
 used for rabbit shooting from which the income was 5. Pari. Debates 
 (Lords 1913), vol. xiv, pp. 1743-44. Cf. also (Commons) vol. lii, pp. 
 913, 919-20.
 
 THE ENGLISH LAND-VALUE DUTIES 225 
 
 provements prematurely, would force land and buildings 
 into the market before there was a demand for them. 
 Moreover, it was feared that such a duty by giving the 
 owner an incentive to build would have the effect of over- 
 utilization of the land; the familiar argument, that gardens, 
 squares, and other open spaces, the so-called "lungs" of 
 the city, would be built upon, to the detriment of public 
 health. On the other hand, the opponents also claimed that 
 the purpose of the duty on undeveloped land would be 
 frustrated, because so far as the rich estate-holder on the 
 periphery of growing towns was concerned, a tax of one- 
 fifth of one per cent would not impose a special burden upon 
 him to induce him to develop or sell the land.^ Speculation 
 would go on and land remain vacant as before. 
 
 The question of the definition of undeveloped land 
 proved perplexing. To guard against special hardships, 
 as well as to prevent evasions the following provisions were 
 inserted: ^ 
 
 (a) Land which had once been improved but has become 
 derelict shall be exempt for a period of one year after it has 
 ceased to be used; after that such land shall be subject to 
 the duty as undeveloped land. 
 
 (b) When the owner of unused land proves that he or his 
 predecessors had incurred expenditures on roads, sewers, 
 etc., with the purpose of developing the land, such land 
 shall be regarded developed to the extent of one acre for 
 every complete 100 of that expenditure, provided, that 
 not more than ten years have elapsed since the outlay was 
 made. 
 
 (c) For the purposes of this duty, undeveloped land shall 
 not include minerals, nor mineral land. 
 
 (d) When value-increment duty has been paid on unde- 
 veloped land, the site value of this land, for purposes of 
 computing the amount of undeveloped land duty, shall be 
 
 * Pari. Debates (1909), vol. xii, p. 675 et passim. 
 Cf. Bill 144 (1910), 16.
 
 226 THE TAXATION OF LAND VALUE 
 
 reduced by a sum five times the amount paid as value-in- 
 crement duty.^ 
 
 Furthermore, to guard against the evil of overutilization 
 of land as well as to encourage gardening and open spaces 
 in the interest of health and recreation, the following ex- 
 emptions from duty were stipulated: ^ 
 
 (a) Land, the site value of which does not exceed 50 
 per acre. 
 
 (b) Agricultural land, except when the site value exceeds 
 50 per acre; in the latter case undeveloped land duty shall 
 be charged only on the amount by which the site value ex- 
 ceeds the average value of purely agricultural land. 
 
 (c) Parks, gardens, and open spaces used by the public; 
 also land held vacant for games and recreation in the inter- 
 est of the public. 
 
 (d) Land not exceeding an acre in extent occupied with a 
 dwelling-house; or any gardens or pleasure grounds which 
 together with the dwelling-house do not exceed twenty 
 times the annual value of the gardens; but such land shall 
 be exempt to the extent of five acres only. 
 
 (e) Agricultural land held under a tenancy originally 
 created by a lease, or agreement made, or entered into be- 
 fore April 30, 1909. 
 
 (/) Small holdings in case of agricultural land occupied 
 or cultivated by the owner, where the total value of the 
 land with any other land belonging to the same owner does 
 not exceed 500.^ 
 
 In order to prevent the evasion of duty under exemption 
 (c) above, which provides for the exemption of sites used 
 for games or other recreation grounds used under some 
 agreement with the owner, the Act stipulates that such 
 exempted land, "shall not be built upon unless the Local 
 Government Board give their consent, on being satisfied 
 that it is desirable in the interest of the public that the re- 
 
 ^ This provision is to prevent double taxation. 
 
 BiU 144 (1910), 17. Ibid., 18.
 
 THE ENGLISH LANI>-VALUE DUTIES 227 
 
 striction on building should be removed." Under such a 
 provision, obviously, only a bona fide purpose will tempt the 
 owner to seek exemption. 
 
 As we shall see later, ^ for the purpose of levying this duty 
 a quinquennial valuation is provided for to ascertain the 
 site value of undeveloped land. Therefore, irrespective of 
 any changes that may occur in the value of the land, the 
 assessed site value remains unchanged during the five year 
 period between valuations. ^ 
 
 10. Vehement as was the opposition to the enact- 
 ment of the undeveloped land duty, the controversy waged 
 fiercest about the mineral-rights duty. For here, not alone 
 the landowners but the mining industry were deeply con- 
 cerned. Indeed, of the four duties proposed, the one on 
 mineral rights had to meet the severest criticism, especially 
 in the early stage of the debate. Convinced of the diflScul- 
 ties of valuation and the uncertainty of both the incidence 
 and yield of the tax as first proposed, the Chancellor of the 
 Exchequer was persuaded to revise the clauses with regard 
 to taxing mineral land.^ As originally drafted this tax was 
 a charge of two-tenths of one per cent on the capital value 
 of the unworked mineral land and was in every respect 
 correlated to the duty on undeveloped land, its supporters 
 claiming that the duty would have the effect of opening up 
 the mines and increasing industry. But the proposal to 
 tax unworked minerals aroused a storm of antagonism. 
 How was the value of minerals unworked and beneath the 
 surface to be ascertained? 
 
 The duty which was finally adopted falls on the royalty 
 
 which the lessor enjoys "without contributing anything 
 
 to the rates of the district or in any way risking his 
 
 money." * It is a charge of one shilling for every twenty 
 
 shillings of the rental value of all rights to work minerals 
 
 1 Infra, 12. * Cf. Pari. Debates (1918), vol. LVi, p. 350. 
 
 Ibid. (1909), vol. ix, pp. 662 jf. 
 
 * Ibid. (1909). vol. xii, p. 587. The sentiment against the mine- 
 owners at the time of the budget agitation ran high. At a conference
 
 228 THE TAXATION OF LAND VALUE 
 
 and of all mineral way-leaves.^ A mineral way-leave is 
 
 defined as "any way-leave, air-leave, water-leave, or right 
 
 to use a shaft granted to or enjoyed by a working lessee, 
 
 whether above or under ground, for the purpose of access 
 
 to or the conveyance of the minerals, or the ventilation or 
 
 drainage of his mine or otherwise in connection with the 
 
 working of the minerals." ^ Like the undeveloped land 
 
 duty this is a direct annual levy, but the rate is five per 
 
 cent of the rental value, as compared with the one-fifth 
 
 of one per cent tax on the capital value of undeveloped 
 
 land. 
 
 From the standpoint of the government the amended 
 
 provisions were an improvement over the original proposal 
 
 rather than a concession to the Opposition. First, the 
 
 change obviated the complexities involved in valuing un- 
 
 worked minerals, and made the administration of the tax 
 
 comparatively simple. In case of a lessee most mines 
 
 are operated by lessees in England the annual value is 
 
 easily ascertained, for it is the amount of rent paid by the 
 
 working lessee in the last working year. The difficulty 
 
 arises in computing the annual value in case the proprietor 
 
 himself is the operator of the mine. The law provides that 
 
 the Commissioner shall determine the rental in such cases. 
 
 He is to determine a hypothetical value, "the sum which 
 
 of Scottish miners it was estimated that the annual value of the 
 coal in Great Britain was 120,000,000, and that of this sum nearly 
 10,000,000 were paid to the landowners in royalties. The mines are 
 for the most part worked by lessees, who also protested against the ex- 
 orbitant rents exacted from them. " In one important section of our 
 industries we are already sufficiently and more than sufficiently handi- 
 capped. The country at large, however, knows very little of it, but it 
 appeals to me very forcibly indeed. It stands up against me in every 
 balance sheet of the various companies of the north of England with 
 which I am connected. These companies alone during the last ten years 
 have paid no less than 761,000 in royalties and way-leaves, an average 
 of 76,000 per annum. Apart from my own particular interests, the 
 Cleveland district within the period of my own life-time has yielded 
 royalties to a sum exceeding 13,000,000 sterling." Budget, Land, and 
 the People, p. 48. 
 Bill 144 (1910), 20. * Ibid., 24.
 
 THE ENGLISH LANI>-VALUE DUTIES 229 
 
 would have been received as rent by the proprietor in the 
 last working year if the right to work the minerals had been 
 leased to a working lessee for a term, and at a rent, and on 
 conditions, customary in the district, and the minerals had 
 been worked to the same extent and in the same manner 
 as they have been worked by the proprietor in that year." ^ 
 Another difficulty that may arise in the administration of 
 the duty is to ascertain the amount to be deducted from 
 the taxable annual rental for expenditures incurred by the 
 proprietor in boring and proving the minerals. In regard 
 to this allowance, the Act provides that, when the rental 
 is shown to the Commissioner to exceed the rental custom- 
 ary in the district, and to represent a return for expendi- 
 ture on the part of any proprietor which would ordinarily 
 have been borne by the lessee, the Commissioner shall 
 estimate and make allowance for the excess amount of 
 rent. 
 
 Secondly, under the revised proposal, the mineral-rights 
 duty became a more productive source of revenue. Whereas 
 under the original plan Lloyd George had estimated the 
 yield of both the undeveloped land and unworked min- 
 eral duties at about 350,000 for the first year, when the 
 change was made to the duty on rental, he set the estimate 
 for mineral-rights duty alone at 350,000.* 
 
 In one respect, however, the change in the bill was said 
 to be a surrender of principle, and a concession to the Oppo- 
 sition. As the bill originally stood, the tax on the unworked 
 minerals would have, according to theory, fallen on the 
 proprietor of the mine, the person whom it was intended 
 to burden. Regarding the duty as finally adopted, i.e., on 
 working mines only, although Lloyd George and others 
 contended that it could not be shifted to the lessee nor 
 affect the market price of the product, this contention has 
 
 BQl 144 (1910), 20. See Pari. Debates (1909), vol. xn, pp. 599 ff. 
 
 * Ibid. (1909), vol. iv, p. 540: vol. xi, p. 604. As a matter of fact the 
 revenue yielded even the first year greatly exceeded the estimate. Cf. 
 infra, 14.
 
 2S0 THE TAXATION OF LAND VALUE 
 
 been questioned. In fact, in consenting to exempt "com- 
 mon clay, common brick clay, common brick earth, or 
 sand, chalk, limestone, or gravel," the Chancellor of the 
 Exchequer was inconsistent, for if the taxation of the above- 
 named minerals would enhance their market price, why 
 should it not do the same thing in the case of the other 
 minerals? It may have been merely a concession to the 
 Opposition. Nevertheless, the argument that upon the 
 renewal of the lease the rental would be raised to the 
 amount of the tax capitalized, causing a rise in the price 
 of the raw material, has not been refuted experimentally.^ 
 
 The complex provisions with regard to the assessment of 
 the mineral-rights duty, arising from the conflicting or syn- 
 chronous occasion for the value-increment duty on mineral 
 lands, will be analyzed in the following section. 
 
 11. When the clauses of the Finance Act relating to the 
 mineral-rights duty are analyzed, we find in reality two 
 duties embraced under the one name: first, the five per 
 cent tax on the rental value of the minerals comprised in 
 a mining lease or being worked by the proprietor at the 
 time the Act was passed and so long as the mines continue 
 to be so worked; secondly, a twenty per cent tax charged 
 on the annual value increment in case of mines opened 
 for work after the 30th day of April, 1909. Whenever the 
 annual value-increment duty is levied, no mineral-rights 
 duty, that is, no five per cent tax on the rental, is collect- 
 ible. When the purpose of this provision is explained, the 
 seeming complexity will disappear. In the first place, be- 
 cause mines are wasting assets, that is, are subject to 
 depreciation in value when worked, they must be treated 
 somewhat differently from other land whose tendency is 
 rather to increase in value. Secondly, since the mineral- 
 rights duty is charged only on mines which are being 
 
 ^ Pari. Debates (1909), vol. ix, pp. 666 Jf. Of course, the law provides 
 that the proprietor, not the operator of the mine, shall be liable for the 
 tax. The question is whether the owner is the ultimate bearer of the 
 duty.
 
 THE ENGLISH LAND-VALUE DUTIES 231 
 
 worked, unworked mines would be at an advantage, or at 
 a premium, unless they were made subject to the value- 
 increment duty. But the value-increment duty, thirdly, 
 on a wasting asset is impracticable, because the value in- 
 crement on the occasion of a transfer could not be deter- 
 mined, for the value on the occasion might be found to be 
 less than on the previous occasion, or than the original site 
 value; and yet the rental accruing to the mine owner dur- 
 ing the period might have included an increment. There- 
 fore, since the indirect levy of the value-increment duty 
 is impracticable, and since the mineral-rights duty on 
 working mines is insufficient without the value-increment 
 duty, the annual value-increment duty was devised to ap- 
 ply only in case of mines opened to be worked after April 
 30, 1909. 
 
 A few illustrations of the method of assessment will 
 further elucidate the complicated provision: (1) Suppose 
 A owns a mine which is unworked. He pays no mineral- 
 rights duty on it, because the duty is inapplicable to un- 
 worked mines. The owner now places no value upon the 
 minerals; therefore, at the general valuation made, it is 
 recorded as of no value in accordance with section 23 (2) 
 of the Act. Now, suppose A sells the mine in 1911 for 
 500. Increment duty is payable on the whole 500, and 
 amounts to 100. Had A set a value on the mine, as he had 
 a right to do, at the time of the original valuation, he would 
 have been subject to less value-increment duty.^ (2) Sup- 
 pose A's mine was being worked by a lessee, B, since 1905, 
 in payment of a rental of 200 yearly. ^ A would be liable 
 
 ^ What prevents the owner from putting a high or any value on the 
 mines is that that value would be taken also as the sum on which he 
 would pay rates and death duties when that occasion arose. The par- 
 ticulars of a contested case of assessment under this clause decided in 
 favor of the Government are given in the Solicitora' Journal, vol. Lviii, 
 p. 749. 
 
 * The royalty contracted for in mining leases is often made depend- 
 ent upon the product mined. Thus " a usual form of mining lease reserves 
 a dead rent to cover a certain amount of minerals brought to the surface,
 
 282 THE, TAXATION OF LAND VALUE 
 
 for mineral-rights duty at the rate of five per cent of the 
 rental; in this case an annual tax of lO as long as the 
 mine continued to be worked. (3) Assume that B who 
 purchased the mine in 1910 for 500 leases it to C, to be 
 worked at an annual rental of 60. B will now be hable 
 for an annual value-increment duty of twenty per cent 
 of the annual value increment. To ascertain this value, 
 the law has created a hypothetical original annual value 
 to be computed at "two-twenty-fifths part of the capital 
 value on the last preceding occasion on which value- 
 increment duty has been collected otherwise than as an 
 annual duty." ^ In other words, the value increment in 
 the illustration above is the difference between the rental 
 60 and two twenty-fifths of 500, or 40; at the rate of 
 twenty per cent the annual increment tax will be 4. In 
 this case also the duty will continue to be levied while the 
 mine is being operated. When the mine ceases to be worked 
 the proprietor will again have the option of placing a value 
 upon it or not. If later the mine is sold or passes on death, 
 while it is yet unworked, value-increment duty will be 
 paid in a lump sum; if it is leased or recommences to be 
 worked by the proprietor, annual value-increment duty will 
 be payable.^ 
 
 It is important to note that in accordance with the Act 
 the reversion and value-increment duties are suspended 
 
 with a royalty on the excess, a power to make up shortages and a cesser 
 of rent on payment either by rent or royalty of a certain sum being the 
 estimated value of the minerals or the mine. In the case of such a lease 
 it is possible, that increment-value duty may in some cases greatly ex- 
 ceed the dead rent, in others be nothing at all. The proprietor will often 
 pay far more by way of increment-value duty under the provisions of 
 this section than he would if he paid on a capital sum. But he obtains 
 some security against paying on an unrealized increment." Napier, The 
 New Land Taxes, pp. 112-13. 
 
 * Bill 144 (1910), 22. This arbitrary, hypothetical annual value is 
 on the basis of twelve and a half years piu-chase, which even for mineral 
 lands is a reasonable, i.e., short period for capitalization. Pari. Debater 
 (1909), vol. XI, p. 1271. 
 
 Napier, op. cit., pp. ixaff.
 
 THE ENGLISH LANI>-VALUE DUTIES 33 
 
 with regard to mineral land only when their levy would 
 involve the double taxation of such land. Thus reversion 
 duty is payable in case of a non-mining lease of land even if 
 it contains minerals, or of a lease of land containing any of 
 the exempted minerals, such as common clay, brick clay, 
 limestone, gravel, etc. Thus also mineral land, as we have 
 seen, is liable to the indirect levy of value-increment duty, 
 except while the mine is being worked. Moreover, the 
 payment of the annual value-increment duty relieves the 
 proprietor or lessor from the payment of mineral-rights 
 duty only to the amount of value-increment duty paid by 
 him in that year. Other provisions to be noted are as fol- 
 lows: (1) A reduction of duty is allowed when the rental 
 represents in part a return for money expended within 
 fifteen years by a lessor in boring or otherwise proving the 
 minerals.^ (2) When a mine subject to duty ceases to be 
 worked for two years, it is regarded as an unworked mine 
 upon which a capital value must be placed.^ (3) Not only 
 is a leased mine subject to duty, but Ukewise any way- 
 leave. 
 
 12. From the foregoing analysis of the duties, it will 
 be clear that the administration of the new taxes is not 
 simple. Besides the assessment and collection, the Com- 
 missioners were confronted with the colossal task of valuing 
 all the land in the United Kingdom including Ireland, 
 approximately eleven million hereditaments.' The admin- 
 istration including the valuation was put in the hands of 
 the Commissioners of Inland Revenue. But so enormous 
 
 1 Bill 144 (1910), 22 (4). 
 
 * Ibid., 23. As we have already pointed out, unless the proprietor fur- 
 nishes the commissioners an estimate of the capital value of the minerals, 
 specifying the kind of minerals the land contains, the mine is assumed to 
 have no value. The consequence of this provision will readily be per- 
 ceived. It places the owner in a predicament; for while it is in his interest 
 for purposes of value-increment duty to place as high a value as possible 
 on his mineral land, for purposes of estate duty or local rating, it is in his 
 interest to estimate the value as low as possible. 
 
 * Report of the Commissioner of Inland Revenue (Cd. 5833), 1911, p. 149.
 
 84 THE TAXATION OF LAND VALUE 
 
 was the task of establishing the machinery of the system 
 that a new department had to be founded, namely, the 
 Valuation Department, and the services of the Assessors 
 of Income Tax, who are appointed for each Income Tax 
 Parish by the District Commissioners of Taxes and who, 
 therefore, have local knowledge of the rating assessment 
 books, had to be employed. The help of these assessors, 
 called Land Valuation Officers, was dispensed with, how- 
 ever, as soon as their reports had been turned in to the 
 District Valuers.^ 
 
 For the purposes of the valuation the United Kingdom is 
 divided into fourteen Divisions, each of which is under the 
 control of a Superintending Valuer. Each Division in turn 
 is subdivided into Districts, under the charge of a District 
 Valuer, a number of Assistant Valuers and a staff of cleri- 
 cal and technical assistants. A number of expert Mineral 
 Valuers are also employed.^ All the valuers are responsible 
 to the Chief Valuer, the head of the Valuation Depart- 
 ment. The administrative duties are performed by a staff 
 consisting of an Assistant Secretary, four Committee 
 Clerks and assistants. In Ireland, the valuation of the 
 land is under the charge of the Government Valuation 
 Department which was already in existence at the time 
 of the passing of the Act. The work of valuation is 
 much facilitated in Ireland because the detailed particu- 
 lars regarding estates are already known to the Depart- 
 ment. 
 
 Considering the important results, statistical and fiscal, 
 which the leaders of the government hoped to accomplish 
 through the valuation, the procedure should be further de- 
 scribed. When the valuation shall be completed, the record 
 
 * Report of the Commissioner of Inland Revenue (Cd. 583S), 1911, pp. 
 158-59. 
 
 * In 1911 there were employed one Chief Valuer at a salary of 1200; 
 15 Superintending Valuers at salaries of 800 each; 49 Valuers of the 
 First Class, and 107 of the Second Class at salaries of 550 and 350, 
 respectively, and 1376 assistants, etc. Ibid., p. 157.
 
 THE ENGLISH LAND-VALUE DUTIES 235 
 
 of the value, character, and boundaries of every parcel of 
 land will constitute another "Domesday Book," the fa- 
 mous undertaking of land valuation in William the Con- 
 queror's time.^ Each hereditament has to be classified and 
 numbered by the Land Valuation Officers, and forms of re- 
 turn prepared and issued to owners in accordance with the 
 provision of the Act. These forms have been subjected to 
 much criticism, 2 because of the detailed particulars which 
 the owner is called upon to give. Especially is this true of 
 Form 4 issued for purposes of the value-increment duty.' 
 From statutory companies, such as railway, dock, or other 
 quasi-public companies, only the cost of the land to the 
 company is required. 
 
 Having gathered the returns from the owners,* a provi- 
 sional valuation is made and served upon the owner or any 
 other interested party who has applied for a copy of the 
 valuation. The unit of valuation is the hereditament, or 
 unit of occupation as on April 30, 1909; but at the request 
 of the owner a smaller unit may be taken if such heredita- 
 ment is under separate occupation. This provision has, 
 however, been amended allowing, under certain conditions, 
 parcels of land if owned by one person to be valued together, 
 provided the aggregate area does not exceed one hundred 
 acres.* Unless the owner gives notice of objection to the 
 
 ^ The Commissioner mentions one case of an estate which has remained 
 in the hands of one family from the time of William the Conqueror's 
 Domesday Book to this day. The estate covering about 2,296 acres is now 
 valued at about 26,748, the annual value being over 1428. Report of 
 the Commissioner of Inland Revenue (Cd. 5833), 1911, pp. 149, 168. 
 
 Cf. Pari. Debates (1913), vol. l, pp. 1527-39, 160/. 
 
 ' Besides particulars concerning ownership, tenure, and area, the 
 owners are required to state the annual value, the annual value of the 
 fixed charges, of the public right of way, of right of common, of the public 
 rights of user, of easements and covenants, etc. Additional particulars 
 as to gross value, site value, total value, assessable site value and particu- 
 lars as to how the values were arrived at may be returned, if desired. 
 
 * Dxu-ing 1910-11, about 10,700,000 forms were sent out, the number 
 of returns was 9,600,000. RejtoH, etc. (Cd. 5833), p. 160. 
 
 Revenue Act (1911), 4.
 
 S6 THE TAXATION OF LAND VALUE 
 
 provisional valuation within sixty days, the valuation be- 
 comes permanently adopted as the original site value. 
 This value can then be changed for a different apportion- 
 ment only in case the unit of valuation is changed. 
 
 The valuation will serve as the basis of the levy of value- 
 increment duty and of undeveloped land duty. In case of 
 the former, a subsequent valuation of the land will be made 
 whenever an occasion for duty arises. For this subsequent 
 valuation, the selling price in case of a sale is taken as the 
 "total value, " and by a process of deductions the site value 
 is obtained. Both for the original site value and for the 
 subsequent valuations, the "total" and "site" values are 
 to be recorded. The process of attaining these is shown 
 by the form on the opposite page.^ 
 
 The value-increment duty is a stamp duty. Thus, the 
 document of transfer must be sent to the Revenue Office 
 and the stamp affixed to the deed.^ 
 
 For imdeveloped land duty the original site value is the 
 assessable value. As the Act provides for quinquennial 
 valuation only, the value for purposes of undeveloped land 
 duty remains unchanged for five years. The quinquennial 
 valuations will serve also as the basis for levying value- 
 increment duty in case of corporations on April 5, 1914, 
 and every fifteenth year thereafter.' 
 
 A special form of return is issued for purposes of paying 
 reversion duty.* All persons to whom a benefit accrues on 
 
 ^ Form of Notice of Appeal (A) Schedule to the Land Values (Refer- 
 ence) Rules, 1910, made by the Reference Committee for England under 
 33 of Finance Act (1909-10). The complexity of procedure will be 
 noticed. 
 
 * There are two other kinds of stamps, one "indicating that all par- 
 ticulars necessary to enable a correct assessment to be made have been 
 furnished"; the other, the "no duty payable" stamp, where no claim 
 for duty can arise. Report, etc. (Cd. 5833), p. 163. 
 
 ' Important amendments in 1913 (Revenue Bill 175, 13) provide 
 for the first revaluation of the land in 1916, instead of in 1914, and make 
 April 5, 1919, the first periodical occasion for levying duty on corpora- 
 tions. 
 
 * Cf. Report, etc. (Cd. 5833), Appendix II (F), p. 181.
 
 THE ENGLISH LAND-VALUE DUTIES 237 
 
 County 
 
 Provisional Valuation 
 Parish 
 
 No. of hereditament 
 
 1. Gross Value 
 
 
 Deductions from Gross Value 
 
 
 
 
 (a) To arrive at Full Site Value 
 
 (6) To arrive at Total Value 
 
 2 
 
 Difference between Gross 
 Value and Value of the 
 Fee Simple of the Land 
 
 
 3. Fee Farm Rent, Rent" 
 Seek, Quit Rent, Chief 
 Rent, or Rent of As- 
 
 
 
 
 divested of Buildings, 
 
 
 size. 
 
 4^ 
 
 
 
 Trees, etc. 
 
 
 4. Other Perpetual Rent 
 or Annuity. 
 
 5. Tithe or Tithe Rent 
 Charge. 
 
 6. Burden or charge aris- 
 ing by operation of 
 Law or imposed by 
 Act of Parliament. 
 
 .1 
 
 s 
 
 
 
 
 
 7. If Copyhold, Cost of En- 
 
 
 
 
 
 franchisement. 
 
 
 
 
 
 8. Public Right of Way or 
 
 
 
 
 
 User. 
 
 
 
 
 
 9. Rights of Common. 
 
 
 
 
 
 10. Easements. 
 
 
 
 
 
 11. Restrictions under cove- 
 
 
 
 
 
 nant or Agreement. 
 
 
 
 Total Deductions 
 
 
 Total Deductions 
 
 
 
 Full Site Value 
 
 
 Total Value 
 
 
 Deductions from Total Value to Arrive at Assessable Site Value. 
 
 
 12. Deductions from Gross Value i 
 
 arrive at Full Site Value 
 (as above) 
 
 
 13. Works executed. 
 
 
 14. Capital Expenditure. 
 
 
 15. Appropriation of Land for stret 
 
 ;ts, roads, open spaces, etc. 
 
 
 16. Redemption of Ijand Tax or FL 
 
 sed Charge. 
 
 
 17. Enfranchisement of Copyholds. 
 
 
 18. Release of Restrictive Covenants. 
 
 
 19. Goodwill or personal elements. 
 
 
 20. Cost of clearing site. 
 
 
 Total Deductions. 
 
 
 Assessable Si 
 
 te Value. 

 
 2S8 THE TAXATION OF LAND VALUE 
 
 the expiration of a lease are required to return this form 
 filled in to the District Valuer, who makes and reports the 
 valuation to the Revenue Office. For reversion duty, there- 
 fore, as for mineral-rights duty, the provisional valuation 
 is not necessary. Mineral land, indeed, is treated as a sepa- 
 rate parcel of land. ^ Minerals are to be valued showing the 
 total or market value, and the capital value, that is, the 
 market value less the value attributable to any works exe- 
 cuted or expenditures incurred. As mineral-rights duty is 
 for the most part charged on the actual rent paid there is 
 little difficulty in its collection, since the existing machin- 
 ery for the assessment and collection of the Income Tax 
 can be employed; and the data needed for mineral-rights 
 duty were made accessible in that way. The progress made 
 by the Commissioners and the difficulties encountered will 
 be considered in the following section. 
 
 13. The progress made in the valuation can be judged 
 from the fact that out of the eleven million hereditaments 
 in the three Kingdoms, about four and one-half millions 
 in the United Kingdom alone had, up to May, 1913, been 
 valued. The following year the total number of heredita- 
 ments valued had reached the figure, eight millions.^ 
 The valuation of Ireland has proceeded less rapidly. Up 
 to September, 1912, about twenty-five thousand heredita- 
 ments had been reported as valued.' The number of 
 "occasion" valuations in Great Britain for collection of 
 value-increment duty was up to the same date 539,970, 
 The cost of valuation and collection to March, 1913, was 
 1,390,000,^ and it was estimated that each valuation for 
 
 Bill 144 (1910), 23. 
 
 * Statement by Lloyd George in House of Commons. Pari. Debates 
 (1913), vol. m, p. 886; ibid. (1914), vol. lxiv, p. 286. 
 
 Ibid. (1913), vol. L, p. 836. 
 , * Ibid., vol. LU, p. 811. The cost has been as follows : 
 1910-11, 332,559. 
 1911-12, 355,290. 
 1912-13, 506.653. 
 (Estimated cost) 1913-14, 630,086. 
 Ibid., vol. LI, pp. 376-77; vol. ui, p. 1682.
 
 THE ENGLISH LAND-VALUE DUTIES 239 
 
 value-increment duty costs the Government a guinea.* 
 By March, 1914, the expense of the department had in- 
 creased to 2,178,397; and by 1915 to very nearly 3,000,- 
 000.2 -pijg number of officials employed in the Valuation 
 Department had increased as shown below:' 
 
 1910-11, 1550 persons. 
 1911-12, 2830 
 1912-13, 4150 
 1913-14, 4650 
 
 Over four thousand of the employees in 1914 were 
 temporary appointees. 
 
 When we are told, however, that only three and one-half 
 millions of the four and one-half million provisional valu- 
 ations in 1913 had been settled or recorded as permanent, 
 we realize the serious problems which confront the valuers 
 and which have given rise to many appeals. First, as 
 regards the machinery provided for appeals, except in the 
 few instances where the Conunissioners' decision is final.^ 
 In the first instance an appeal may be made to a referee. 
 The Act provides ^ for the appointment of a Reference 
 Committee for each Kingdom to be composed for England 
 of the Lord Chief Justice of England, the Master of the 
 Rolls and the President of the Surveyors' Institution. 
 The Reference Committee in turn appoints the referees 
 out of a panel composed of persons admitted as Fellows of 
 
 1 Pari. Debates (1913), vol. LI, p. 376. 
 
 * Ibid., vol. Lii, p. 811; (1914), vol. LXin, p. 1605; (1915), vol. Lxxii, 
 p. 508. Lloyd George's expectation that the valuation would be practi- 
 cally completed by March 31, 1915, did not materialize. Judging from 
 the rate of progress made in the preceding years, however, the cause may 
 lie in the interruption of the work occasioned by the enlistment for 
 the war of several thousand of the men in the Valuation Department. 
 
 Ibid. (1915), vol. ijoa, p. 2366; (1914), vol. LViii, p. 782. 
 
 * The Commissioners* decision is to be considered final in judging of 
 the value of the covenant entered into in determining the " total value " 
 under 25 (3), and in assessing for undeveloped land duty under 17 (3) 
 of the Act. 
 
 Bill 144 (1910), 33 and 34.
 
 840 THE TAXATION OF LAND VALUE 
 
 the Surveyors' Institution, or other persons having experi- 
 ence in the valuation of land. The referee appealed to de- 
 termines all matters of valuation in consultation with the 
 Commissioners and the appellant, or any persons nomi- 
 nated by the Commissioners and appellant, respectively, for 
 the purpose. The referee is also authorized to decide who 
 shall be liable for the expenses incurred. The owner or 
 Commissioner may appeal from the decision of the referee 
 to the High Court. Or in cases of disputes involving not 
 more than 500 the appellant may have recourse to the 
 County Court instead of to the High Court. Further 
 appeal may also be had to the Court of Appeal. 
 
 According to Lloyd George's estimate, only one out of 
 every 833 valuations has been subject to appeal.^ Until 
 February, 1913, 4466 appeals were entered against the 
 provisional valuations, .118 per cent of the total number.^ 
 But only a few of these even came before the referee, the 
 greater number of objections being adjusted between the 
 owner and the Commissioner. Only in the case of 155 
 hereditaments up to 1913 did the appeal reach the referee.' 
 Of twenty cases before the referee on the question of valu- 
 ation, twelve were decided in favor of the valuers, in five 
 there was a compromise, while three were decided against 
 the Commissioners.* Until March, 1913, 1272 appeals were 
 taken against the undeveloped land duty, and 123 against 
 the value-increment duty.^ 
 
 But it is the character of the appeals, more than the 
 number, that in the eyes of many condemns the present 
 system of levy of the land-value duties. This becomes evi- 
 dent from the fact that the collection of both the undevel- 
 oped land duty and the value-increment duty is tempora- 
 rily altogether in abeyance as a result of certain judicial 
 decisions, There have occurred a few important cases, 
 
 Pari. Debates (1913), vol. Ul, p. 886. * Ibid., vol. L, p. 1591. 
 
 Ibid., vol. LU, p. 886. * Ibid., vol. L, p. 1591. 
 
 8 Ibid., vol. u, p. 1163. Ibid, (1915), vol. lxxi, p. 2366.
 
 THE ENGLISH LAND-VALUE DUTIES 241 
 
 which, when the decision of the referee was unfavorable 
 to the Commissioners, were appealed by the latter to the 
 High Court, as test cases. One of these cases, Herbert's 
 Trustees versus the Commissioners of Inland Revenue, has 
 given rise to a great deal of criticism due to the ambiguity 
 of the definitions of value under the value-increment duty 
 clauses. The estate in question is located in Glasgow and 
 its assessable site value was fixed at minus 545. This 
 value was obtained by computing the assessable site value, 
 in accordance with the Act, from the total value after cer- 
 tain deductions had been made. As in this case, it may 
 happen that the value of the deductions to be made from 
 the total value exceeds the total value, ^ thus resulting in 
 a mimis quantity for the assessable site value. The Scot- 
 tish Lands Valuation Appeal court decided that a minus 
 value could not exist, that value could not mean minus 
 value; ^ but upon appeal to the High Court this decision 
 was reversed.' Although a minus assessable value is logi- 
 cally admissible, for an increment in value may represent a 
 decrease in burden as well as a positive increase in advan- 
 tage, nevertheless such a value is merely hypothetical and 
 theoretical and indicates the complexities of the Act. 
 Moreover, a further diflficulty presented itself when the 
 minu^ value was legalized. The Court had to decide that 
 in accordance with the provision of exempting ten per 
 cent of the original site value, the ten per cent deduction 
 was to be of the full site value, not of the assessable site 
 
 ' In the case mentioned the deductions amounted to 4320, the total 
 value to 3775, leaving 545 for the assessable site value. " Assessable 
 site value is something more than the value of the cleared land; as the 
 value of a building and site on which the building stands is always some- 
 thing more than (different than) the arithmetical sum of the two values 
 of the building and site." (Cox-Sinclair and T. Hynes in Law Magazine 
 and Review, vol. xxxviii, p. 336.) In other words, the difficulty of deter- 
 mining the value of the separate units in a compound for which both 
 units are indispensable is here shown. 
 
 ' Cf. Solicitors' Journal, vol. Lvi, p. 469. 
 
 Pari. Debates (1913), vol. uv, pp. 2266-67.
 
 242 THE TAXATION OF LAND VALUE 
 
 value, ^ for to take ten per cent of a minus quantity as a 
 deduction from duty would be absurd. 
 
 Another case which aroused the ire of the Opposition and 
 which led to the amendment of the Finance Act was the 
 Lumsden case. In 1911, Mr. Lumsden, a speculative 
 builder, sold a piece of property for 750. The property 
 had not then been valued under the Finance Act to ascer- 
 tain the original site value. When the oflBcial valuation 
 was made, some months after the sale, the original site 
 value was fixed at 625 or 125 less than the property had 
 sold for. Mr. Lumsden was said to have agreed that the 
 value of the property as by a willing seller to a willing 
 buyer was 625 as fixed by the valuer. He had neverthe- 
 less succeeded in selUng it for 750 because the buyer be- 
 lieved he had a monopoly location for the shop which was 
 upon the site.^ The decision of the referee, upheld by the 
 Court, was that the property was liable for value-increment 
 duty on the 125. Although it seemed evident even to the 
 government that the value of the site had not increased, the 
 latter contended that the increment was a "fortuitous 
 windfall" and therefore, taxable. On the other side, it was 
 argued that the profit made by Mr. Lumsden was due to 
 the existence of the shop and to his personal abiUty; hence 
 was not taxable. It is worth noting that in spite of the fa- 
 vorable decision of the Court, the government introduced an 
 amendment ' in 1913 which will prevent the recurrence of 
 taxing "fortuitous windfalls" in case of improved property 
 of which the building is worth more than the site.^ 
 
 Pari. Debates (1913), vol. LVi, p. 319. In 1913 (see Revenue Bill 
 175, 6) the amendment stipulated that where the site value on which 
 the reduction would be calculated is less than 100, the reduction may 
 be calculated as ten per cent of the value increment. 
 
 Ibid., vol. L, pp. 184, 187. 
 
 ' The Revenue Bill (1913), 2. This clause gives the owner of im- 
 proved property, when the value of the buildings exceeds that of the site, 
 the option of having the property valued on the basis of the hypothetical 
 value as under the Act or on the basis of the actual selling price. 
 
 * The Land Union, an organization opposed to land-value taxation,
 
 THE ENGLISH LAND-VALUE DUTIES 243 
 
 In the valuation of agricultural land also some difficul- 
 ties have arisen. It is charged that the valuers include 
 fences, roads, drains, and manuring in the site value of 
 agricultural land. Some cases contesting this practice have 
 arisen. Another question which was, in 1913, sub judice, 
 was whether or not tenants' rights should be deducted 
 from the agricultural value of the land. Between two and 
 three million acres of agricultural land are liable to unde- 
 veloped land duty.^ 
 
 In view of the serious defects in the law and of the 
 numerous loopholes for evasion of taxation,^ the wide- 
 spread dissatisfaction with the land-value duties, even on 
 the part of those who helped pass the measure,' is explain- 
 able. The valuation has been practically condenmed by 
 the Departmental Committee on Taxation * and in the 
 report of the Land Conference, the latter finding such a 
 lack of uniformity in valuation that "it could not be fairly 
 used either for the purposes of a national tax or even for 
 the assessment of duties imposed by the 'People's Budget* 
 itself." ^ Nevertheless, granting that the expense of valua- 
 tion has already been enormous and out of all proportion 
 
 and that has tried to get adverse decisions on the commissioners' valuar 
 tions, threatened to appeal the Lmnsden case to the High Court. The 
 case did reach the House of Lords where the vote of the four judges 
 was evenly divided. A member of the Opposition said in the House of 
 Conunons that the Government would have preferred an adverse decision 
 in this case, because the claim of Mr. Lumsden was generally conceded, 
 and no amendment to the law would then have been necessary. Cf. 
 Pari. Debates (1914), vol. Lxv. pp. 631, 672. 
 
 Ibid. (1913), vol. L, p. 177; vol. m. p. 1146; (1914), vol. Lvra, 
 p. 821. 
 
 * Cf. Law Quarterly Review (1914), vol. xxx, p. 180; Law Magazine and 
 Review, vol. xxxix, pp. 326 Jf. 
 
 ' Cf. Pari. Debates (1913), vol. L, p. 176. 
 
 * Ibid. (1914), vol. Lxn, pp. 477-78. 
 
 ' Both bodies mentioned above are said to have been composed of a 
 partisan and prejudiced majority. At the Land Conference the Survey- 
 ors' Institute, the Auctioneers* Institute, the Land Agents' Society, the 
 Chamber of Agriculture, the Farmers' Union, etc., were represented. 
 Ibid., vol. Lviii, p. 812.
 
 244 THE TAXATION OF LAND VALUE 
 
 to the yield of the taxes thus far collected, granting that 
 the herculean task of valuation will yet cost millions of 
 pounds before completion/ granting also that hardships 
 have been entailed in some cases in levying the taxes, 
 and that difficulties have arisen sufficient to question the 
 possibility of accurate valuation, the conclusion, neverthe- 
 less, cannot be escaped that when completed the data'' 
 will not only be invaluable for statistical purposes, but 
 will have far-reaching effects fiscally and socially. 
 
 14. If the valuation of the land has been subjected to 
 ridicule, the land-value duties have fared no better. From 
 a fiscal standpoint the powerful opposition which the 
 land taxes encountered seems scarcely warranted. More- 
 over, the fact that after half a dozen years the opposition 
 has not abated and that the law stands unrepealed con- 
 firms the conclusion expressed earlier that a social princi- 
 ple, not fiscal expediency, was involved in its enactment. 
 The receipts from the land duties have been disappointing 
 beyond measure. Already for the year 1910-11 the yield 
 (the mineral-rights duty excepted) fell short of the official es- 
 timate.' And instead of increasing in amount as had been 
 predicted, the revenue from three of the duties, as appears 
 from the subjoined data, continues to be inconsiderable. 
 
 ^ It will be remembered that in accordance with the provisions of the 
 amended Act a revaluation of the land in 1916 is due. 
 
 * The new Domesday Book will be a card catalogue of all the land in 
 the three Kingdoms. One card is given to each unit or hereditament; it 
 contains the particulars of the original and subsequent valuations, and 
 bears the identification number of each parish. The cards of each parish 
 are filed in separate cabinets and arranged in numerical order. Report 
 of the Commissioners of Inland Revenue (1911), p. 166. 
 
 Estimated receipts Actual net proceeds 
 
 Value-Increment Duty 
 
 50,000 
 
 127 
 
 Reversion Duty 
 
 100,000 
 
 258 
 
 Undeveloped Land Duty 
 
 100,000 
 
 2,351 
 
 Mineral-Rights Duty 
 
 350,000 
 
 506,289 
 
 600,000 509,025 
 
 This is according to the revised estimate of the Chancellor. Cf. Pari. 
 Debates (1909), vol. iv, p. 542; vol. xu, p. 702.
 
 THE ENGLISH LAND-VALUE DUTIES 245 
 RECEIPTS FROM LAND-VALUE DUTIES. 1910-19IS 
 
 
 1910-1911 
 
 1911-191S 
 
 191S-191S 
 
 1913-191 i 
 
 19H-1916 
 
 Total up 
 to March 
 SI, 1915 
 
 Value-incre- 
 ment duty 
 
 Reversion 
 duty 
 
 Undeveloped 
 land duty 
 
 Mineral- 
 rights duty 
 
 127 
 
 258 
 
 2,351 
 
 506.289 
 
 6,127 
 
 22.620 
 
 28,947 
 
 436,194 
 
 17,000 
 48,000 
 98,000 
 
 298,000 
 
 31,000 
 
 80,000 
 
 275,000 
 
 349,000 
 
 48,316 
 
 19,313 
 
 8,657 
 
 106,000 
 170,000 
 413,000 
 
 Total... 
 
 509,025 
 
 493,888 
 
 461,000 
 
 735,000 
 
 725.000 
 
 
 
 How unproductive a source of revenue the duties have 
 been is further apparent from a comparison of their total 
 yield with the cost of their collection and valuation, the 
 cost exceeding the receipts up to 1915. Of the four duties 
 the mineral-rights duty has proved the most productive 
 and promises to yield a stable annual amount. It is worth 
 noting that the Opposition even seems reconciled to this 
 duty, regarding it as part of the income tax.'^ The produc- 
 tiveness of the duty on mineral rights is attributable to its 
 characteristics: (1) No valuation of the land is necessary 
 for its assessment; (2) the machinery of assessment already 
 existed at the time of the enactment; (3) it is a direct levy, 
 not dependent upon the number of transfers of property. 
 In contrast, the proceeds from the undeveloped land duty, 
 as a direct, annual tax, are exceedingly trifling. This is 
 explicable on various grounds: first, inasmuch as the duty 
 is collected only on the unimproved land that has been 
 valued, the true yield of the undeveloped land duty will 
 not be known until the valuation has been completed;' 
 
 * Data taken from Pari. Debates (1915), vol. lxxi, p. 2366; vol. lxxii, 
 p. 1478; HazeWs Annual Register (1912), p. 121; Statesman's Yearbook 
 (1915), p. 48. 
 
 Pari. Debates (1915), vol. isxxn, p. 1705. 
 
 ' The collection of the arrears of this duty will undoubtedly create 
 hardships on many who will be compelled to pay three or four years' duty.
 
 246 THE TAXATION OF LAND VALUE 
 
 and, secondly, the operation of the tax has been tempora- 
 rily suspended by reason of the court decisions. The fluc- 
 tuation and increase in amount are due to the inclusion of 
 arrears from previous years. The paltry sums yielded by 
 the indirect taxes, namely, the value-increment and rever- 
 sion duty, are accounted for by the fact that the levy of the 
 former is dependent upon the number of transfers of prop- 
 erty, of the latter upon the determination of long-term 
 leases. The transfer of certain kinds of property was said 
 to have been interfered with during the stormy sessions of 
 Parliament and even after the enactment of the Finance 
 Bill.^ Moreover, the taxable value increment accruing 
 during the first troublous year and even in the few suc- 
 ceeding years could be but sUght. Indeed, it is very likely 
 that the market value of some land has been unfavorably 
 affected by the duties. On the other hand, the few cases 
 reported as liable for reversion duty during the first year 
 are attributable, according to the Commissioners of Inland 
 Revenue, 2 to the liberal exemptions and to the ignorance 
 and misunderstanding of the liabilities under the Act. 
 In the last years the amount of reversion duty has been 
 insignificant because of the legal controversies still sub 
 judice. 
 
 The above considerations show that temporary causes 
 chiefly have tended to make the yield of the new duties 
 inconsiderable. Whether the anticipations of the Chan- 
 cellor of the Exchequer who saw in these new taxes a source 
 of an expanding revenue for the needs of the State ' were 
 well founded, it is too early to predict.* But while final 
 
 * Cf. Solicitors' Journal, vol. LVii, p. 780. That this was not true of the 
 large estates will be shown infra, 15. It is necessary to point out that 
 the ordinary transfer tax on property was doubled by the Finance Act 
 (1909-10), 73. 
 
 * Report for 1911, p. 164. 
 
 Pari. Debates (1909), vol. iv, pp. 537, 539; vol. ix, p. 318. 
 
 * " That the possibilities of the tax are still highly regarded is, never- 
 theless, evidenced by the protests made by the local authorities against 
 the provision of the Revenue Bill now before Parliament by which half
 
 THE ENGLISH LANI>-VALUE DUTIES 247 
 
 judgment concerning the fiscal expediency of the land- 
 value duties for imperial purposes must be withheld, the 
 possibilities of fiscal reform which the enactment of the du- 
 ties has opened up must also be taken into account. The 
 utility of the valuation itself is no longer questioned. The 
 chief reasons are: ^ (1) the compulsory acquisition of land 
 by local authorities will henceforth be based on the assessed 
 value of the land instead of on the speculative value fixed 
 by the owner; (2) it will prevent the undervaluation of 
 land for death duty purposes; ^ (3) the valuation will 
 greatly faciUtate the adoption of local rating on land 
 value, for which bills continue to be introduced in the 
 House of Commons.' 
 
 15. After all, however, considering the primary pur- 
 pose of the land- value duties, the question of fiscal expe- 
 diency must give way to the question of the social and 
 economic effects. As we reflect upon the extravagant 
 claims of the adherents and the vehemence of the opposi- 
 tion when the possible effects of the land duties were de- 
 bated in Parliament, we may wonder at the apparently 
 unchanged conditions, social and economic, since these 
 duties have come into operation. To quote for illustra- 
 
 the proceeds of the taxes is to be swept into the exchequer in lieu of 
 the value of the outdoor relief saved to the authorities by the recent 
 extension of the operation of the Old Age Pension Act to paupers." 
 (Financial Review of Reviews, April, 1911, p. 27.) In explanation of 
 this passage it is necessary to note the provision of section 91 of the 
 Finance Act, 1909-10, for an equal division of the revenue accruing 
 from the land duties between the imperial and local governments. The 
 Revenue Bill of 1911, however, repealed the provision, so that the total 
 revenue is now devoted to imperial purposes. 
 
 * Cf. Financial Review of Reviews, April, 1913, p. 35. 
 
 * See Speech by Lloyd George at City Liberal Club (February, 1912), 
 p. 12. 
 
 ' Even in 1912 three "local rating on land value" bills were introduced 
 in the House of Commons. Bill 64 (Scotland) passed a second reading; 
 Bill 25 was withdrawn, while Bill 173 was dropped after a second reading. 
 Very significant is the provision for a new valuation for rating purposes 
 which Lloyd George included in his Budget Proposals of 1914. Cf. Pari. 
 Debates (1914), vol. lxii, p. 478,
 
 248 THE TAXATION OF LAND VALUE 
 
 tion Mr. Winston Churchill's hopeful expectations: "The 
 effect will be, as we believe, to bring land into the market 
 and thus somewhat cheapen the price at which land is 
 obtainable for every object, public and private, and by so 
 doing, we shall liberate new springs of enterprise and in- 
 dustry, we shall stimulate building, relieve overcrowding, 
 and promote employment." ^ The failure of these claims to 
 materialize is not difficult to explain. First, the taxes are 
 not yet in full operation. Secondly, the tax rates are too 
 slight to be burdensome; that is, a tax of one fifth of one 
 per cent on undeveloped land will scarcely check specula- 
 tion and lead to the utilization of more land. Thirdly, other 
 social forces tend to counteract the influences which the 
 duties may exert, for example, the increasing population 
 in urban communities. Thus, it may be argued, the salu- 
 tary effects of the duties have not yet been felt. 
 
 On the other hand, facts have been presented to show 
 that the new taxes have had a deleterious influence on the 
 building trade. That there was a depression in building 
 operations in England in the years following the enact- 
 ment of the duties is seen from the following data: in 
 1910-11, only ten per cent of the number of small houses 
 of 20 annual value and below were erected, that had been 
 erected in each year from 1904 to 1906. '^ A member of the 
 Opposition quoted the following figures to show the injuri- 
 ous effect of the taxes on building operations: ' In 1901, 
 
 ^ The Budget, the Land, and the People, issued by the Budget League 
 (1909), p. 46. 
 
 * The figures quoted by Mr. Peto in the House of Commons were: 
 in 1904-06 (on an average) 107,021 small buildings had been built, in 
 1910-11 the total number was 10,651. Pari. Debates (1913), vol. l, p. 208. 
 Cf. also ibid. (1914), vol. LViir, p. 854. 
 
 The same member, Mr. Royds, caused an inquiry to be made on his 
 own account, and in reply to his question, " Have the Budget Land Taxes 
 affected the building trade in your district? " received answers as follows: 
 (1) "The provisional valuation scheme has destroyed credit and fright- 
 ened mortgagees. ... In the whole of this city I do not think there are a 
 dozen cottages under construction." (2) "... the values of the official 
 valuer have had a depressing and unnerving influence on the builder and
 
 THE ENGLISH LANI>-VALUE DUTIES 249 
 
 in the forty towns investigated there were 65,000 uninhab- 
 ited houses, in 1911 the number had decHned to 47,740, 
 and in 1913 to 24,000. In reply it was pointed out that the 
 high cost of building materials and of labor and the in- 
 crease in the rate of interest and in local rates were respon- 
 sible for the shortage of small houses; while in general the 
 conditions in the building trade had improved since the 
 imposition of the land-value duties. The last statement 
 was substantiated by the decrease in unemployment in the 
 trade since 1909, which was a year of depression, and by 
 the advance in wages in the building trades over and above 
 that in general wages. ^ Whether, as some claim, the law 
 has withdrawn capital from the building trade, ^ discour- 
 aged building operations and raised rents,' or whether the 
 depression was the result of the uncertainties attending 
 the valuation and the interpretation of the law has not 
 been proved.^ Another effect which from the standpoint 
 of the government is favorable is that large estates are 
 being broken up, and that there is in consequence an 
 increasing number of small owners of land. This is gener- 
 ally admitted even by the Opposition,^ but the result of 
 
 on the owners of property. Values of twenty per cent less than cost are 
 usual from the value here. . . . This has had a distressing effect upon the 
 investing public, who for some years have shunned property and have 
 not yet recovered. Its effect is entirely to upset all confidence in the 
 property market." Pari. Debates (1914), vol. lviii, pp. 806-07. 
 
 1 Ibid. (1914), vol. Lviii, pp. 824, 845-46. The percentages of un- 
 employment were given as follows: 1906, 7.2; 1907, 7.3; 1908, 11.5; 
 1909, 11.7; 1910, 8.6; 1911, 6; 1912, 4.2; 1913, 3.8. These percentages, 
 quoted by Lloyd George, were declared misleading, because the member- 
 ship of the building trade unions had decreased since 1909. 
 
 * Ibid. (1913), vol. L, p. 1558. 
 Ibid., p. 171. 
 
 * Cf. ibid., vol. ui, p. 905. The testimony of the members of Parlia- 
 ment regarding the depression in the building trade, was, however, not 
 unanimous. Thus it was claimed by one member that building opera- 
 tions in towns were more active and that unemployment in that industry 
 was less than for many preceding years. Ibid., vol. l, pp. 1551 ff. 
 
 * See Speech by the Earl of Portsmouth in the House of Lords. Pari. 
 Debates (Lords, 1913), vol. xiv, p. 1067.
 
 250 THE TAXATION OF LAND VALUE 
 
 the abnormal sale of estates is said by them to have been 
 that it has put the tenant farmer in an unfortunate posi- 
 tion.^ It should be mentioned also that the value of 
 land has tended to increase in spite of this tendency toward 
 disintegration.* 
 
 * Pari. Debates (Commons, 1913), vol. LVm, p. 812. 
 Ibid., pp. 825-186.
 
 CHAPTER VI 
 
 BIUNICIPAL TAXATION IN WESTERN CANADA 
 
 1. Real estate is the prevailing and chief source of 
 local revenue in Canada. The cause for the separation of 
 the central, provincial, and local sources of public revenue 
 in Canada is political rather than economic. But, since 
 the Dominion government relies for its revenue chiefly 
 upon customs and excise taxes, and the provincial govern- 
 ments upon corporation and succession duties, and rail- 
 way, income, and similar taxes, little else ^ remains for the 
 local authorities to tax besides property, real and personal. 
 And though the personalty tax, now generally discredited 
 in Canada,^ is being superseded by the business or other 
 taxes,' real property constitutes the main source of muni- 
 cipal income. So long as landed property continues to be 
 the main source of wealth in the community, and so long 
 as the principle of benefit, the principle of taxation which 
 Canadian writers accept as self-evident,* continues to give 
 satisfaction to the ratepayers, real estate will bear the 
 heaviest burden of taxation. 
 
 * Licenses, franchises, poll, income, and business taxes are other taxes 
 levied in the Canadian localities, but these are unimportant, subsidiary 
 sources of revenue. 
 
 * The various provincial tax commissions were invariably in favor of 
 its abolition. C/. Report of the Ontario Assessment Commission (1902). 
 Also Sessional Papers, Ontario (1893), No. 73, and the Report of the Royal 
 Commission on Taxation in British Columbia (1911). 
 
 ' The business tax, which has taken the place of the personal property 
 tax in Ontario, is reported as working well. Cf. The Municipal World, 
 November, 1909, pp. 272-73. 
 
 * For example, the alderman of Westmount, Quebec, who succeeded 
 in introducing some reforms in the system of taxation in his city defines 
 taxation as " a payment by the individual to the organized community 
 for services rendered to him by it." Canadian Municipal Journal, 
 June. 1914, p. 230.
 
 262 THE TAXATION OF LAND VALUE 
 
 That the Canadian fiscal system should have developed 
 along lines similar to the English system is readily com- 
 prehensible. Considering the differences in the economic 
 and social conditions of the two countries, however, it is 
 noteworthy that the assessment on annual or rental value, 
 as in England, was prevalent in Canada until the fifties. 
 This method of assessment, which distributes unequally 
 the burden of taxation by exempting unused property from 
 taxation, was perpetuated in England by a dominant land- 
 owning class. In new and democratic communities, how- 
 ever, where the principle of equal distribution of the tax 
 burden tends to be jealously observed, and the recipro- 
 cal relation between services of the government and the 
 wealth of the individual is accepted as an article of faith, ^ 
 the transition to assessment on capital value seems inevit- 
 able. In Canada the first departure from the traditional 
 system is seen in the provision of the tax law for Upper 
 Canada in the fifties, that the taxable annual value should 
 in every case constitute the real rack rent, and if the rent 
 be less than six per cent of the actual value of the land, the 
 assessed rental should be calculated at six per cent of the 
 full or capital value.^ Shortly afterward followed the 
 change to assessment on capital value in Ontario (1869).' 
 And now, with one exception,* rating on capital value has 
 become general throughout Canada. 
 
 2. More recently the western provinces of Canada 
 
 have departed still further from the English system by 
 
 ^ The fact that public utilities and improvements enhance the value 
 of the vacant as well as of the improved land is cited again and again 
 in Canada in discussions on taxation. Therefore, also " special assess- 
 ment " taxes are common in western Canada. 
 
 * Full value is the amount at which the land would be appraised in 
 payment of a just debt from a solvent debtor. The Consolidated Statutes 
 for Upper Canada, 22 Vic, c. 55, 28; 16 Vic, c 182, 12. 
 
 32 Vic, c. 36, 30; see also Revised Statutes of Ontario (1877), c. 
 180, 23. 
 
 * The city of Quebec still rates on the annual rental. Cf. Vineberg, 
 Provincial and Local Taxation in Canada, in Columbia University Studies 
 (1912), vol. 111. p. 91.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 253 
 
 exempting improvements from the real-estate tax. The 
 tendency is even to remit all other taxes for local purposes, 
 so as to make the value of the land the sole source of local 
 revenue. The causes of this tendency to adopt the single 
 tax on land value are fiscal, economic, and social. So great 
 has been the appreciation in the value of the land in the 
 western provinces, that the owner does not feel the burden 
 of the taxes. As will be shown later, ^ the rise in land value 
 has kept pace with the increased budgets without necessi- 
 tating any considerable increase in the tax rate. In the 
 eastern provinces, on the other hand, where the value of 
 the improvements nearly equals or exceeds the value of the 
 land, and where the value of the land is more constant,^ 
 the remission of other taxes and the exemption of improve- 
 ments would necessitate a higher tax rate and the burden 
 on the land would be increased. 
 
 Attention should be called to the similarity between 
 western Canada and the Australasian colonies both in 
 respect to the underlying economic and social conditions 
 and in respect to the legislation resulting from those con- 
 ditions. Western Canada, comprising British Coliunbia, 
 Manitoba, Alberta, and Saskatchewan (omitting the 
 Yukon and the Northwest Territories),^ reminds one of 
 the vastness and wildness of their sister colonies in the 
 Eastern Hemisphere. Like Australasia, western Canada 
 is the hope of the venturesome pioneer; both are very 
 sparsely populated. Settled by squatters, mainly specu- 
 lators, the western provinces display the same eagerness 
 as Australasia to attract immigrants and to encourage the 
 employment of labor and capital. Moreover, the same 
 
 ^ See infra, 8. 
 
 * Cf. Canadian Municipal Journal, December, 1912, p. 490. 
 
 ' For purposes of comparison Canada must be dismembered, for the 
 newly opened western country is in many respects as different from 
 eastern Canada, as Australia, for example, from its mother country. 
 The Yukon and Northwest Territories are scarcely organized and popu- 
 lated. There are only about 27,000 people in about 1,500,000 square 
 miles of territory (1912).
 
 254 THE TAXATION OF LAND VALUE 
 
 ideals, such as equality of opportunity, the same resent- 
 ment and intolerance toward special privilege, character- 
 ize both countries. The greatest boon to the inhabitants 
 is, of course, the injQux of immigration, and as prosperous 
 industrial conditions and business opportunities are the 
 chief incentive to settlement, it behooves even the specu- 
 lators to promote improvements and business enterprises. 
 The land problems in the two countries differ only in 
 degree. The following facts throw light on the condition 
 of land tenure in the western provinces. Western Canada, 
 i.e., the three prairie provinces, was acquired by the 
 Dominion by purchase from the Hudson's Bay Company.^ 
 But the federal government disposed of part of these lands 
 by liberal grants to railway companies and by sale to land 
 speculators. The original grant to the Canadian Pacific 
 Railway Company alone was 27,000,000 acres plus 17,000,- 
 000 acres from the absorbed roads.* At present it owns 
 about 200,000 acres in Manitoba, excluding 70,000 acres 
 owned by the Canadian North-West Land Company, a 
 child of the Canadian Pacific. Li Alberta and Saskatche- 
 wan, 7,000,000 acres belong to the same company; while 
 in British Columbia it owns about 4,000,000 acres more. 
 The Esquimalt and Nanaimo Railway Company owns 
 nearly 1,250,000 acres on Vancouver Island alone. Besides, 
 there are fifteen incorporated land companies owning vast 
 estates in British Columbia.' Considering, however, that 
 the area of the four provinces contains more than 700,000,- 
 000 acres, the crown lands have by no means all been dis- 
 posed of. Nevertheless, although the Dominion lands are 
 
 1 Cf. Rupert's Land Act (1868), 31-32 Vic, c. cv. The Hudson's Bay 
 Company, by the charter from King Charles II, claimed and held pos- 
 session of this whole western territory until after the Confederation of 
 1867. At about that time the land was ceded to the Dominion for a cash 
 bounty and certain fur-trading privileges, the company retaining one- 
 twentieth of the land as well. Cf. An Official Hand Book of Alberta (1907), 
 p. 6; also the London Economist, March 16, 1912, p. 573. 
 
 Ibid. 
 
 Agriculture in British Columbia, Official Bulletin 10 (1912), p. 00. ,
 
 MUNICIPAL TAXATION IN WESTERN CANADA 255 
 
 still extensive, they are not the most desirable lands, for 
 the territory near and along the main railway lines is in 
 the hands of the Canadian Pacific, while the Hudson's Bay 
 Company's lands comprise one-twentieth part of all the 
 fertile belt.^ 
 
 There is still much free land in Alberta and Saskatche- 
 wan, of whose area scarcely half has yet been surveyed, 
 while in British Columbia the Dominion Government owns 
 3,500,000 acres in the Peace River country and a large 
 area in the River Belt.'' There is less free arable land 
 in Manitoba, except in the north and northwest.' The 
 Dominion lands are open for entry to homesteaders.* 
 The policy of the Canadan Pacific Railway Company, as of 
 most of the land companies, has been to sell its holdings at 
 
 An Official Hand Book of Alberta (1907), p. 56. The London Econo- 
 mist, March 16, 1912, p. 573. 
 
 * The number of acres of Dominion lands surveyed to January 1, 
 1913, was 154,552,067 acres, of which only 30,000,000 have yet been dis- 
 posed of. The Canada Year Book (1912), p. 432. Cf. also Lawson, Canada 
 and the Empire, pp. 202-03. Bureau of Provincial Information, OflBcial 
 Bulletin 10 (B.C., 1912), p. 95. 
 
 ' Cf. Canada Hand Book (1915), p. 67. The following data present 
 concisely the conditions of land tenure and of cultivation in the four 
 western provinces in 1901 and 1911 (Canada Year Book (1914), p. 170): 
 
 
 Total area 
 {acres) 
 
 Occupied lands 
 
 Provineet 
 
 Area 
 (acres) 
 
 Improved 
 {acres) 
 
 Unimproved 
 (acres) 
 
 British Columbia: 
 
 1901 
 
 236,922,177 
 226,186,370 
 
 41,169,098 
 41,169,098 
 
 161,872,000 
 161,872,000 
 
 155,764,480 
 155,764,100 
 
 1,497,419 
 2,540,011 
 
 8,843,347 
 12,228,233 
 
 2,735,630 
 17,751,899 
 
 3,833,434 
 28.642.985 
 
 473,683 
 477,590 
 
 3,995,305 
 6,746,169 
 
 474,694 
 4,351,698 
 
 1,122,602 
 11,871,907 
 
 1,023,736 
 
 1911 
 
 2,062,421 
 
 Manitoba: 
 
 1901 
 
 4,848,042 
 
 1911 
 
 5,482,064 
 
 Alberta: 
 
 1901 
 
 2,260,936 
 
 1911 
 
 13,400,201 
 
 Saskatchewan: 
 1901 
 
 2,710,823 
 
 1911 
 
 16,771,078 
 
 
 
 * The applicant for a homestead of 160 acres pays a fee of $10. The 
 conditions of entry are: (1) six months' residence in every year on the 
 land; (2) the cultivation of at least fifteen acres for three years.
 
 256 
 
 THE TAXATION OF LAND VALUE 
 
 reasonable prices. It is of course in the interest of these 
 companies to promote immigration and settlement. At 
 the outset the Canadian Pacific sold land at $2.50 per acre 
 with a rebate of half the amount for every acre brought 
 under cultivation. At present, the average selling price 
 for good land is $10 per acre without rebate for improve- 
 ment, while the irrigated lands bring prices of $30 to $55 
 per acre. ^ Within recent years the influx of population has 
 been very rapid and the investment of foreign capital in 
 land, chiefly by English and American capitalists, has 
 increased enormously. ^ The result has been a great appre- 
 ciation in the value of the land, mainly an inflated valua- 
 tion.' 
 
 Not only has the increased rural population in the west- 
 
 ^ The following data show the enormous profits reaped by the land 
 companies from their land sales (Lawson, op. cit., pp. 97, 210) : 
 
 CANADIAN LAND SALES IN THE NORTHWEST 
 
 
 1893-1908 
 
 1909-1910 
 
 
 Acres 
 
 Value 
 
 Acres 
 
 Valxte 
 
 Canadian Pacific Railway 
 
 8,453,730 
 1,614,153 
 1,171,400 
 
 1,240.087 
 
 1,153.999 
 
 1.022.915 
 
 213,206 
 
 $35,062,944 
 9,484,943 
 6.638,511 
 
 4.454,800 
 
 4,006,301 
 
 2,017,224 
 
 990,963 
 
 655,585 
 104,382 
 285,428 
 
 18,323 
 
 14,501 
 
 106,000 
 
 571 
 
 $10,473,425 
 1,297,454 
 2,783,010 
 
 182.926 
 
 126,950 
 
 Hudson's Bay Company 
 
 Canadian Northern Company 
 Calgary and Edmonton Corn- 
 
 Manitoba South Western 
 
 Q'Appelle, Long Lake, and 
 Saskatchewan Company. . . 
 Great Northern Central 
 
 964.600 
 6 863 
 
 
 
 Total 
 
 14,769,490 
 
 $62,655,686 
 
 1,184.790 
 
 $15,835,228 
 
 
 * "The speculation in city properties has largely been in the hands 
 of foreign investors and a class of semi-professional real estate dealers 
 resident here." London Economist, February 1, 1913, p. 221. 
 
 ' Farm land in Manitoba is said to have increased ten per cent in price 
 within the last five years, while the average increase in Saskatchewan 
 and Alberta has been fully thirty per cent. Ibid., March 9, 1912, p. 632. 
 Near cities, like Saskatoon and Regina, Sask., unimproved land brings 
 $40 to $50 per acre, whereas elsewhere it brings only $10 per acre. Ibid., 
 March SO, 1012, p. 686.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 257 
 
 ern provinces caused an appreciation in the value of farm 
 land, but the rapid growth of the incorporated local bodies 
 has given rise to " booms " in town land. It has been esti- 
 mated that of the 1,244,597 immigrants who entered the 
 western provinces from 1900 to 1909, 31.4 per cent were rep- 
 resented in homestead entries. Allowing for the immi- 
 grants who became farm laborers and those who bought 
 land from the land and railway companies, a considerable 
 proportion must have become residents of the towns. ^ A 
 few examples will make this evident. From 1901 to 1911, 
 the urban population of Alberta increased from 20,623 to 
 141,937 (588 per cent); that of Manitoba from 70,473 to 
 200,365 (184 per cent); that of British Columbia from 
 90,179 to 203,684 (126 per cent); and that of Saskatche- 
 wan from 17,550 to 131,365 (648 per cent).^ The follow- 
 ing table shows the increase in the niunber of munici- 
 paHties in Saskatchewan:' 
 
 1905 1913 
 
 Rural municipalities 
 
 2 
 
 290 
 
 Villages 
 
 6S 
 
 255 
 
 Towns 
 
 16 
 
 72 
 
 Cities 
 
 S 
 
 5 
 
 This development, then, has caused a prodigious value 
 increment to accrue from realty transactions. And while 
 speculators are seeking to attract capital to this new coun- 
 try in order to reap further profit from the increment in the 
 value of the land, the taxpayer in the municipality feels 
 himself aggrieved because the property of the absentee, 
 held for speculation in an unimproved condition, rises in 
 value as a result of the community's expenditure for im- 
 provements. In further explanation of the attitude of the 
 
 ^ " The Immigration Situation in Canada," in Report of the Immigror 
 tion Commission, U.S. Senate Doc. No. 469 (1910), p. 22. 
 
 Canada Year Book (1912), pp. 14-19. 
 
 * Canadian Municipal Journal, October, 1913, p. 412; cf. also The 
 Public Service Monthly (Sask.), vol. ii, September, 1913, p. 10; December, 
 1914, p. 126.
 
 258 THE TAXATION OF LAND VALUE 
 
 settlers toward this class of landowners, we may note that 
 in many towns the Hudson's Bay Company and the railway 
 companies hold large tracts unimproved.^ To hit these 
 non-residents and to attract capital, such is the end toward 
 which the system of taxing the land irrespective of im- 
 provements is chiefly directed. When we add the fiscal 
 factors, the elasticity and suflBciency of the tax, and the 
 ethical consideration, to distribute the burden equally on 
 those who can best bear it, we have the motives which 
 have called the tax on land value into being. 
 
 3. The history of the development of the system of 
 exempting improvements from taxation bears out the con- 
 elusion that its adoption was prompted by fiscal and social 
 considerations. The earliest attempt to discourage landed 
 monopoly through taxation was the levy of the wild-land 
 tax in British Columbia. This tax, first imposed in 1873 
 for provincial purposes, applied only to undeveloped land 
 in unorganized communities.^ The rate of tax was one 
 per cent of the value per acre on all land except such as 
 was improved as follows: ' 
 
 (1) Land upon which $1 per acre was expended annually, 
 provided such land did not exceed the value of $20 per 
 acre. 
 
 (2) Land upon which permanent improvements * to 
 the amount in value of 20 per cent of the assessed value 
 of the land had been made. 
 
 (3) Land, not worth $5 per acre, upon which five head 
 of cattle per 100 acres were pastured; or land, when 
 
 ^ Moreover, the lands of the Canadian Pacific Railway Company are 
 exempt from taxation. 
 
 * British Columbia, 36 Vic, No. 11. Having relegated the levy of 
 property taxes to the local governments, the provincial government 
 reserved the right to tax property only in the unorganized districts. 
 Cf. ibid., 1 (6). 
 
 * Other exemptions, such as are usual in taxation, need no mention 
 here. 
 
 * 2 defines permanent improvements as any building, fence, prospect- 
 ing mining work, or reclamation of the land.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 259 
 
 valued in excess of $5 per acre, upon which fifteen head 
 of sheep per 100 acres were pastured. 
 
 (4) Land leased for timber cutting, or for agricultural 
 purposes. 
 
 In 1876 this Land Tax Act was repealed and replaced 
 by a property and income "Assessment Act" which, be- 
 sides a tax of one-third of one per cent on the capital value 
 of real estate, provided for an annual tax of five cents per 
 acre upon all unoccupied land in unorganized districts.^ 
 This provision, though still discriminatory, made the bur- 
 den on unimproved land a nominal one and in many cases 
 represented a reduction in burden, since the tax was now 
 based, not on land value, but on acreage. ^ Since 1900, 
 the rate of the provincial tax on realty has fluctuated 
 from one-half to four-fifths of one per cent; during the 
 same period, the rate on the value of wild land has in- 
 creased from three to five per cent.' During this time the 
 meaning of vnld land has become more clearly defined, and 
 since 1905 * has become differentiated for taxing purposes 
 from timber and coal lands. Wild land is such as has not 
 existing upon it improvements to the value of $2.50 per 
 acre, in addition to the cash value of the land itself, in 
 territory west of the Cascade Range of mountains; and 
 $1.25 in territory east of the Cascade. Temporary struc- 
 tures including machinery and other temporary equip- 
 ment do not constitute improvements. The following 
 
 British Columbia, 39 Vic, No. 8, 1, 9, 10. "Unoccupied land 
 shall mean land on which there shall not be existing improvements to 
 the amount of $5 per acre on each parcel of land." In 1877 (40 Vic, 
 No. 10), this provision was repealed and $2.50 was substituted instead 
 of $5. 
 
 ' The owner of valuable unimproved land was now liable to the same 
 slight charge as the owner of the most worthless property, 
 
 British Columbia. 64 Vic, c 38, 4; 3-4 Edw. VII. c. 53. 5; 5 Edw. 
 VII. c 50, 15. A reduction in case of the realty tax of one-fifth of one 
 per cent, in the case of the wild-land tax of one-half of one per cent, is 
 allowed if the tax is paid before a specified time. 
 
 * British Columbia. 6 Edw. VII, c. 50. 16.
 
 60 THE TAXATION OF LAND VALUE 
 
 rates of tax on the different classes of land are in force at 
 present:^ 
 
 (1) On real estate (improved land), ^ of 1 per cent. 
 
 (2) On wild land, 4 per cent. 
 
 (3) On timber land,^ 2 per cent. 
 
 (4) On coal land, class A (being worked), 1 per cent. 
 
 (5) On coal land, class B (being unworked), 2 per cent. 
 
 (6) On unworked Crown-granted mineral claims, 25 
 cents per acre. 
 
 This wild-land tax, which has persisted since 1873, and 
 which is clearly intended to discriminate against the holder 
 of unimproved land, was until 1914 levied for provincial 
 purposes ^ in British Columbia only. The proceeds are 
 devoted to local improvements. In 1914 a wild-land tax 
 
 1 Revised Statutes of British Columbia, 2 Geo. V, c. 222, 9. The 
 following statement of the annual receipts collected from the wild-land 
 tax by the provincial government shows the increase in yield, due both 
 to the appreciated value of the land and to the increase in rate of tax: 
 
 1906: 
 
 1873 $950.79 Wild land $73,456.41 
 
 1878 9,530.93 Coal land A 1,434.40 
 
 1883 6,162.92 Coal land B 20,038.62 
 
 1893 13,832.00 Timber land 38,160.93 
 
 i9oo::::::::::: Ktsi* Total $133,080.36 
 
 1903 71,340.60 1Q07. 
 
 Ifl0 101,607.89 wild land $91,098.34 
 
 Coal land A 2,463.00 
 
 Coal land B 21,686.00 
 
 Timber land 46,326.97 
 
 Total $161,423.31 
 
 1011 Total $316,130.83 
 
 (Report of Royal Commission on Taxation (British Columhid), 1911, p. 
 B 26; Papers Relative to the Working of Taxation of the Unimproved Value 
 of Land in Canada (Cd, 3740), 1907, pp. 9-10.) 
 
 * " A royalty is reserved to the Crown on all timber cut from Crown 
 lands, from railway subsidy lands, and from lands held under lease or 
 license from the Crown," etc. Where the timber is manufactured or used 
 in the province a rebate is allowed in case of the timber tax. Year Book 
 of British Columbia (1911), p. 283, 
 
 * In Alberta there is a provincial tax on land levied at a flat rate per 
 acre, not on the capital value of the land. Likewise, in Saskatchewan, 
 the provincial land tax is now only one cent per acre. Cf. The Public Service 
 Monthly, Legislative Supplement to the February Number (1913), p. 12; 
 Official Hand Book of the Dominion of Canada (1897), p. 69.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 261 
 
 of one per cent was adopted in Alberta.^ As in British 
 Columbia this charge falls on land outside the boundaries 
 of an incorporated city, town, or village. 
 
 The latter province, it is significant, outdid her sister 
 province to the west by the institution, in 1913, of a tax 
 on the unearned increment of land.^ This tax applies to 
 land transfers in incorporated as well as in the unincor- 
 porated districts of Alberta, and the proceeds are to be 
 devoted to provincial purposes. The rate of tax is five 
 per cent of the value increment, which is the excess of the 
 selling price at the time of transfer over the assessed value 
 in 1913.^ The tax is not collected at the transfer of land 
 from the Crown nor on the death of the owner; while agri- 
 cultural land, of which at least ten per cent has been under 
 cultivation during twelve months preceding the transfer, 
 is also exempt.* 
 
 4. The taxation of real property within the incorpo- 
 rated local bodies was from the first relegated to them by 
 the provincial governments of western Canada. In British 
 Columbia, the councils of the local bodies were already in 
 the nineties authorized to discriminate between land and 
 improvements and to tax the latter at a lower rate. Thus, 
 as early as 1891, the option of rating improvements at a 
 lower value than land was extended to the municipali- 
 ties of British Columbia. According to this provision it 
 was possible to exempt improvements altogether.^ The 
 following year the exemption of at least fifty per cent of 
 the value of improvements was made mandatory.^ The 
 
 Alberta (1914), c. 8. Ibid. (1913), c. 10. 
 
 In case of land not within any incorporated municipality, the original 
 site value is deemed to be $15 per acre, imless the owner within a year 
 from the passing of the Act can prove that the land had a higher value. 
 Cf. ibid.. 4. 
 
 When the area of imsubdivided land, however, exceeds 640 acres, 
 the excess over 640 acres is subject to increment tax, but only to the 
 extent of the excess value beyond the sum of $50 per acre of the unim- 
 proved value of the land. 
 
 6 British Columbia, 54 Vic, No. 29, 132; 59 Vic, c. 37, 136. 
 
 Ibid.. 65 Vic, c 33, 148.
 
 862 THE TAXATION OF LAND VALUE 
 
 municipalities were also empowered to levy a wild-land 
 tax at a rate not to exceed four per cent of the assessed 
 value of such land situated within the boundaries of the 
 municipalities.^ In 1910, out of fifty-one municipalities, 
 only sixteen levied a wild-land tax. The explanation given 
 for this small number that have adopted the tax is that, 
 when assessed as wild land, the value of the land is less than 
 as building land; ^ therefore, in municipalities where the 
 vacant land has been surveyed, subdivided into small lots 
 and assessed as building land, the tax on real property is 
 more productive than the wild-land tax would be.' Only 
 where the land is not ripe for building purposes does the 
 wild-land tax yield more revenue. This conclusion is con- 
 firmed by the fact that only three of the sixteen municipal- 
 ities which in 1910 levied the wild-land tax had more than 
 1000 ratepayers. Besides the wild-land tax, eleven of these 
 sixteen municipal bodies also exempted all improvements 
 from taxation, and four more exempted fifty or more 
 per cent of the value of improvements.^ Altogether, in 
 1914, out of the thirty- three cities in British Columbia, 
 fifteen taxed improvements to fifty per cent of their value; 
 fifteen exempted them entirely; while three taxed them at 
 thirty-three and one-third, thirty, and twenty-five per 
 cent respectively. Out of the twenty-eight district commu- 
 nities, twenty-four exempted improvements altogether.^ 
 
 In the Northwest Territories, of which Alberta and 
 Saskatchewan were a part until 1905, a similar enactment, 
 
 * The rate on real property was not to exceed one and one-half per 
 cent, not including special and school rates; the rate on wild land was 
 in 1896 not to exceed two and one-half per cent. B.C. 59 Vic, c. 37. 
 
 * In a municipality, the land nearer the center, or the business section, 
 has a higher value than in the outlying districts. Until the place is platted 
 and laid out in lots, one acre of land is valued with every other acre as 
 agricultural land. 
 
 * Papers Relative to the Working of the Land Taxes in Canada (Cd. 3740), 
 1907, pp. 8-11. 
 
 * Year Book of British Columbia (1911), pp. 275-76. 
 
 * Haig, Exemption of Improvements from Taxation in Canada and the 
 United States, p. 262.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 263 
 
 in 1894, empowered the councils of the municipalities to 
 exempt all improvements from taxation, provided such 
 exemption should not occasion a higher rate of tax than 
 four per cent for all local purposes, including the general, 
 school, special and debenture rates. For the adoption of 
 this provision a majority vote of two-thirds of the mem- 
 bers of the municipal council, or a petition of at least one- 
 half of the resident ratepayers, was required. In case a 
 petition shall have been presented for two years in succes- 
 sion, the new system of rating becomes law permanently; 
 rescission, however, is possible, if the same procedure of 
 voting, or of petition, is followed as for adoption.^ The 
 option of rating on land value continued after the incorpora- 
 tion of Alberta and Saskatchewan: Indeed, under the Village 
 Act of the latter province a Single Tax may even be raised 
 on land value. ^ For the institution of the Single Tax for 
 municipal purposes, it was required that a petition signed 
 by at least two-thirds of all the ratepayers be submitted 
 to the commissioner. The maximum rate was fixed at two 
 per cent in 1906, but was changed to two and one-half per 
 cent in 1908.' Under the city and town Acts,* improve- 
 ments were required to be assessed at sixty per cent of 
 their actual value; the rate on real property on this basis 
 was not to exceed one per cent of the assessed value. The 
 development of the movement to exempt improvements 
 reached its final stage in the Rural Municipalities Act of 
 1912-13, in the provision that "land shall be assessed at 
 its actual cash value exclusive of any increase in such value 
 caused by the erection of any buildings {hereon^ or by any 
 other expenditure of labor or capital" ^ 
 
 The present status of the legislation in Saskatchewan 
 with reference to land- value taxation is as follows : In cities, 
 
 * Ordinances of Northwest Territories No. 3 of 1894, Pt. rv, 9. 
 
 * Saskatchewan (1906), c. 35, 40. 
 
 Ibid. (1906), c. 35, 40; (1908), c. 18, 181. 
 
 * Ibid. (1908), c. 16, 310; c. 17, 302. 
 
 Ibid. (1912-13), c. 30, 23. (Italics mine.)
 
 M THE TAXATION OF LAND VALUE 
 
 towns and villages improvements shall not be taxed to 
 more than sixty per cent of their value. Since 1911 cities 
 and towns have the option of exempting a greater value of 
 the improvements than forty per cent, provided that the 
 rate of reduction shall not exceed fifteen per cent in any one 
 year.^ This means that any municipality which had 
 availed itself of this provision in 1911 could exempt im- 
 provements to one hundred per cent by 1915. In villages 
 the option of exempting improvements still exists; while 
 in the rural municipalities total exemption is obligatory. 
 On rural land, moreover, a surtax is charged for local pur- 
 poses. The rate is six and one-fourth cents per acre and the 
 land subject to the surtax is as follows : ^ 
 
 (1) Land not exceeding 320 acres owned by a non-resi- 
 dent and of which less than one-fourth is improved. 
 
 (2) Land from 320 to 640 acres, less than one-fourth 
 of which is under cultivation. 
 
 (3) Land from 640 to 1280 acres, less than one-half of 
 which is under cultivation. 
 
 (4) Land from 1280 to 1920 acres, less than one-half of 
 which is under cultivation. 
 
 (5) Land of any owner or occupant exceeding 1920 acres. 
 The subjoined data show how the local bodies had 
 
 responded, by 1914, to the permission to exempt improve- 
 ments: (1) The cities had all taken advantage of the priv- 
 ilege. Moose Jaw in 1914 taxed improvements to forty- 
 five per cent, North Battleford and Weybum to thirty per 
 cent, Regina to twenty-five per cent. Prince Albert and 
 Swift Current to fifteen per cent. (2) Of fifty-five towns, 
 forty-two assessed improvements at sixty per cent, the 
 others at less than sixty per cent, two taxing improvements 
 at twenty-five per cent. (3) About one-fourth of the 246 
 villages exempted all improvements, the others taxing 
 
 1 Saskatchewan (1910-11), c. 18, 15; c. 19, 17. 
 
 * Ibid. (1912-13), c. 81, 4. The discrimination against absentee 
 holdings is here very apparent. An additional burden on the non-resi- 
 dent owner is the hail insurance tax. Cf. Haig, op. cit., p. 84.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 2G5 
 
 sixty per cent. (4) Improvements were exempted alto- 
 gether in the rural and local improvement districts in 
 accordance with the law.^ 
 
 In Alberta, also, from an optional levy in towns and vil- 
 lages, the system of land-value taxation progressed, until 
 in 1912 the exemption of improvements was made com- 
 pulsory throughout the province, except for the cities 
 incorporated under special charters.^ Of the six cities, Ed- 
 monton, Medicine Hat, and Red Deer exempt all improve- 
 ments, Calgary seventy-five per cent, Lethbridge sixty-six 
 and two-thirds per cent, and Wetaskiwin twenty per cent.' 
 
 The government of Manitoba has not gone so far in her 
 legislation as to exempt improvements from taxation in 
 the municipalities. Nevertheless, the same tendency is at 
 work. For example, the "Municipal Assessment Act" 
 provides for the assessment of all land in rural municipali- 
 ties, improved for farming or gardening purposes, on its 
 unimproved value. Thus buildings and residences on farm 
 land are exempt; while improvements on land used for 
 other purposes are taxable. Where lands are improved for 
 the purpose of a local industry other than farming or stock 
 ranching, the improvements may be assessed at not less 
 than one-half of the actual value, if the council so direct.* 
 Winnipeg under a special charter taxes improvements at 
 sixty-six and two-thirds per cent. The other three cities in 
 Manitoba undervalue improvements although illegally.^ 
 
 In all four provinces, therefore, the taxation of land 
 value has received attention, and its introduction for local 
 purposes has been furthered by provincial enactment. 
 The system has progressed farthest in the more recently 
 incorporated provinces, Alberta and Saskatchewan, where 
 the exemption of improvements is more or less obligatory. 
 
 1 Haig, op. cit., p. 262, 
 
 Alberta (1906), c. 63, Pt. xxxi; (1911-12), c. 8, 252; c. 2, 267. 
 
 Haig, op. cit., p. 262. 
 
 * Manitoba, Revised Statutes (1902), c. 117, 28. 
 
 Cf. Haig, op. cit., pp. 19-20.
 
 266 THE TAXATION OF LAND VALUE 
 
 In British Columbia the total exemption of improvements 
 is optional, but the exemption of improvements to fifty 
 per cent of their value is mandatory. The abolition of all 
 other taxes than that on land value is optional, with certain 
 restrictions, in three of the provinces; in Manitoba, how- 
 ever, no provision to that effect has been enacted. 
 
 5. In the legislation reviewed in the preceding section, 
 the beginning as well as the development of the movement 
 toward the single tax for local purposes in western Canada 
 is evident. There seems to have been nothing revolution- 
 ary about the measures; that there has been a develop- 
 ment and an extension of the system, however, cannot be 
 doubted. We may, however, ask, what forces were behind 
 the legislation? In view of the current belief that the 
 Single Taxers were responsible for the introduction of the 
 system in Canada, it is significant to read in the Single Tax 
 Review that the man who drew up the plan of taxation in 
 Edmonton, William Short, did not know who Henry 
 George was, nor had ever heard of the Single Tax.^ Again, 
 in tracing the history of the legislation by the Vancouver 
 Council and by the provincial legislature, Mr. Dicey, a 
 Single Taxer, fails to show the influence of the Single Tax 
 philosophy, except to point out that a few members were 
 followers of George.^ George had, indeed, visited Canada 
 between the years 1885-90, and before the nineties the 
 Toronto Single Tax Association had been organized.' 
 Nevertheless, there is nothing to show that the philosophy 
 of the Single Tax, the principle of land nationalization, had 
 taken root in the young, thriving communities of western 
 Canada, where land is the chief commodity, the chief 
 cause of individual aggrandizement.* 
 
 * Single Tax Review, November-December, 1910, p. 48. 
 Ibid.. May-June, 1911, pp. 56 ff. 
 
 * The Public, June 2, 1911, p. 611. 
 
 * The absm-dity of attributing the "Single Tax" as administered in 
 western Canada to the Georgian philosophy of the Single Tax becomes 
 apparent, when we imagine what the effect of municipalization of the
 
 MUNICIPAL TAXATION IN WESTERN CANADA 267 
 
 The introduction of the tax on land value must be at- 
 tributed rather to fiscal and economic expediency as shown 
 above. ^ This deduction is corroborated also by the feeble- 
 ness of the opposition which the legislation everywhere 
 encountered. If the landowners had been hereditary 
 landed proprietors, or if they had been drawing income 
 regularly from tenants in a densely populated country 
 where land has a value more or less stable, their interests 
 would have been opposed to a tax which puts a heavier 
 burden, or in some cases the whole burden on land. In 
 Canada, however, landowners are primarily speculators 
 whose chief interest lies in attracting labor and capital, 
 that is, new settlers. At the same time they are resident 
 landowners, and they prefer to have their improvements 
 exempted. What wonder, then, that they so generally vote 
 to exempt capital, which they are convinced will accumulate 
 more rapidly if untaxed, and to increase the burden of the 
 non-resident landowner? According to a Single Taxer,^ 
 the legislature of Saskatchewan was unanimously in favor 
 of the bill exempting all improvements from taxation. The 
 Union of Saskatchewan Municipalities in the convention of 
 1910 passed a resolution favoring the abolition of taxes on 
 improvements.' The assessors of some of the municipali- 
 ties in Alberta, Saskatchewan, and British Columbia 
 unanimously attributed the introduction of the tax to the 
 local fiscal and economic needs, not to any Single Tax 
 propaganda. The following are replies of some assessors as 
 to the causes of the adoption of land-value taxation: * 
 
 Medicine Hat: "The chief reason for introducing the 
 single tax system . . . was for the encouragement of build- 
 ings, it being considered that the taxation of improvements 
 was practically a fine upon improvements." 
 
 land, or of a tax on all the value increment of the land, would have on the 
 settlement of the western provinces. 
 
 1 Supra, 2, 3. 
 
 ' F. J. Dixon, The Progress of Land Value Taxation in Canada, p. 8. 
 
 ' The Canadian Municipal Journal, October, 1911, p. S86. 
 
 * Replies received by the writer in answer to a questionnaire.
 
 268 THE TAXATION OF LAND VALUE 
 
 Moose Jaw: "That the burden of taxation might be 
 borne by all parties receiving benefits therefrom." 
 
 Prince Albert: "The legislature made it optional . . . 
 the Council favored its adoption." 
 
 Lethbridge: "First, it was a mistake to penalize those 
 who were willing to build and to operate factories, and to 
 penalize merchants who were willing to carry first class 
 stocks; secondly, it is practically impossible to get an 
 equitable assessment on anything but land values." 
 
 Red Deer: "To encourage building." 
 
 Edmonton: "Much of the land in centres of population 
 was held by non-residents who made no improvements on 
 it but simply held it for speculative purposes. The people 
 actually living in these centres who were increasing the 
 value of lands by their expenditure of time, energy and 
 money deemed it advisable that the non-resident land- 
 owner whose land was being increased in value by them 
 should pay as much towards the revenue of the Municipal- 
 ity as they did, because these non-residents were reaping 
 large profits on account of increased values which they did 
 very little to bring about." 
 
 Alderman Clarke, of Edmonton, speaking before the 
 convention of the Union of Canadian Municipalities,^ 
 expressed doubt as to the influence of the Single Tax or 
 other economic theory; and said as to the motive of the 
 tax: "I believe the real reason for the adoption of the land 
 tax in Edmonton was that a mere handful of people who 
 actually lived in Edmonton at the time the charter was 
 adopted and therefore controlled the municipal govern- 
 ment, owned all the improvements in the city; but out- 
 siders, non-residents, owned large portions of land within 
 the city limits, on which there were no improvements. 
 And the motive for exempting improvements was really 
 a very selfish desire to saddle the non-residents with the 
 greater portion of the taxes, and not a recognition of the 
 * Canadian Municipal Journal, October, 1912, p. 388.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 269 
 
 justice of the land tax in itself. . . . The agitation which led 
 to the abolishment of the floor space ^ and business tax 
 came almost entirely from the retailers." 
 
 Although there was surely an element of self-interest 
 that prompted the adoption of the tax, it was accompanied 
 by that public-spirited interest in a new community which 
 displays itself in collectivistic legislation. In western 
 Canada, indeed, hand in hand with the taxation of land 
 value goes municipal ownership of public utilities.^ There 
 is an aversion to the granting of franchises to private cor- 
 porations, and it is the boast of Edmonton that "it owns 
 and operates its street cars, telephones, waterworks, 
 power plant, street paving and sewer building depart- 
 ment." ' And like the operation of public utilities, so the 
 exemption of improvements has been introduced as a mat- 
 ter of public policy. 
 
 6. If further proof were needed to show that the sys- 
 tem of exempting improvements from taxation was not the 
 outgrowth of the Single Tax propaganda, it would be fur- 
 njroed by the fact that not the slightest agitation exists 
 / /TO make land the sole source of income for Dominion or 
 ^ provincial purposes. On the contrary, the opportunistic 
 character of the system is clear from the fact that land 
 within the mimicipality is considered the proper source of 
 local revenue only; the fact that the community gives land 
 its value is never lost sight of in these communities.* 
 
 * In many Canadian cities the taxation of business prop>erty valued 
 on the basis of floor space which the business occupied superseded the 
 personal property tax. 
 
 * Canadian Municipal Journal, October, 1912, p. S90. 
 
 * From a circular. Calgary likewise owns the street railway system as 
 well as the light and power department, which are a soiux^ of profit to 
 the municipality. "The citizens have grown up with a firm belief in 
 mimicipal ownership, and the results in the form of good service and 
 handsome profits justify their belief." Canadian Municipal Journal, 
 September, 1911, p. 340. 
 
 * This priuciple is illustrated by the demand by North Vancouver 
 that " taxes on land reverting to the Crown on subdivision be paid by the
 
 c/ 
 
 / 
 
 270 THE TAXATION OF LAND VALUE 
 
 Moreover, the fact that a few municipalities, and they are 
 very few, have aboHshed for local purposes all other taxes 
 besides those on land, is no indication that they were dom- 
 inated by the philosophy of the Single Tax. It is impor- 
 tant to point out, moreover, that even within the so-called 
 'Single Tax" communities, other taxes for provincial and 
 Dominion purposes are raised; thus, income and personal 
 property taxes, death duties, customs duties, poll taxes, 
 etc., in so far as they are levied by the provincial or central 
 government, fall on the "Single Tax" municipalities as 
 well. 
 
 Although the exemption of improvements from taxa- 
 tion is prevalent throughout all the western provinces and 
 is almost universal throughout Alberta, only a few munici- 
 palities have as yet found it expedient to abolish the busi- 
 ness, income, or other subsidiary taxes. Licenses continue 
 to be levied even in the cities where the "Single Tax" has 
 been introduced. But since they primarily serve a social 
 rather than a fiscal purpose,^ the use of licenses is not in- 
 consistent with the purpose of the system, namely, to make 
 land value the chief source of local revenue. 
 
 The villages, cities, and other municipalities where land 
 serves as the sole source of pubUc income (license fees 
 excepted) are the following: In Alberta,^ Edmonton, Medi- 
 cine Hat, Red Deer; in British Columbia, Vancouver, 
 Victoria, Kelowna, Westminster, Prince Rupert; ' in 
 Saskatchewan and Alberta, all the rural municipalities. 
 By the Town Act of 1912, the towns in Alberta were 
 obliged to exempt all improvements and to aboUsh all 
 
 government to the municipality." Cf. Canadian Municipal Journal, 
 January, 1914, p. 19. 
 
 * For example, a saloon license or a dog license is issued not for revenue, 
 but for health, morality, or like purposes. 
 
 * There was an announcement in the Canadian Municipal Journal, 
 February, 1914, p. 71, that Lethbridge has postponed the adoption of the 
 Single Tax. 
 
 ' Cf. Single Tax Review, November-December, 1910, p. 50. ,
 
 MUNICIPAL TAXATION IN WESTERN CANADA 271 
 
 other forms of taxation than the land tax. The fiscal diffi- 
 culties which this general enactment occasioned in some of 
 the towns induced the legislature to amend the Act the 
 following year. Upon a petition of at least two-thirds of 
 the members of the council, the Minister was authorized to 
 grant permission to the council to impose a business tax. 
 The tax was to be levied according to the rental value of 
 the business premises, was not to exceed twenty per cent 
 of the rental, and was to be raised for a period not exceed- 
 ing three years. ^ In 1914, it is worth noting, this permis- 
 sive amendment was repealed, and the levy of a business 
 tax was made optional with the council. A two-thirds vote, 
 however, is necessary, and the maximum tax shall not 
 exceed ten per cent of the rental value; nor can the busi- 
 ness tax be adopted for a period exceeding four years from 
 December 31, 1914. ^ It would seem, therefore, that the 
 business tax enactment is deemed a temporary, and an 
 emergency measure merely. As only twelve towns out of 
 the forty-six subject to the Town Act had in 1913 peti- 
 tioned for permission to levy a business tax, it is probable 
 that most of the towns derive all the local revenue from 
 the land tax only. 
 
 It is a matter of some interest that the process of elim- 
 inating other taxes than that on land, and of exempting 
 improvements was a gradual one.' In Vancouver, for 
 example, from 1895 to 1905, improvements were assessed 
 at fifty per cent of their value. From 1906 to 1909, the 
 percentage of value exempted was raised to seventy-five; 
 only since 1910, therefore, has the whole value of improve- 
 ments been exempt. Other taxes were gradually aboUshed 
 in Vancouver. At present, however, except for the subsidy 
 
 Alberta (1913), c. 8, 13 (1st session). 
 
 * Ibid. (1914), c. 7, 7. 
 
 * Exception to this statement must be made in the case of Alberta, 
 where by a " blanket " enactment of the provincial legislature the system 
 was suddenly imposed upon the towns. For the evil eflFects of this meas- 
 ure see the discussion in Haig, op. cit., pp. 129^.
 
 y 
 
 7 THE TAXATION OF LAND VALUE 
 
 from the provincial government for hospitals, schools, and 
 similar purposes, the land tax in Vancouver suffices for all 
 local expenditures.^ In Edmonton, also, the elimination 
 of the other taxes, the poll, business, and floor taxes, was 
 gradual, although since its incorporation (1904) ^ Edmon- 
 ton has exempted all improvements from taxation.' Or 
 take Red Deer for illustration. Before 1912 improvements 
 were assessed at fifty per cent and personal property was 
 taxed. In that year the tax on improvements was entirely 
 removed, and now land constitutes the sole source of 
 revenue. While in all the above-named localities all rates 
 and special assessments * are levied on the unimproved 
 value of the land, there are numerous other municipali- 
 ties which tend to become "Single Tax" communities.^ 
 That the process of change to the new system in the prin- 
 cipal cities of the four provinces is not complete, however, 
 can be seen from the data shown in the table on page 
 273. 
 
 * The subsidy comes out of the provincial taxes levied in Vancouver 
 on personal property and income (the provincial poll tax of $3 on all 
 males between the ages of eighteen and sixty years was abolished only in 
 1912). (From a letter by the Assessment Commissioner, H. J. Painter 
 of Vancouver.) The succession duty and corporation and railway taxes 
 are other sources of provincial revenue in British Columbia. C/. The 
 Year Book of British Columbia (1911), pp. 281 ff. 
 
 ' Cf. Ordinances of the Northwest Territories (1904), c. 19. 
 
 * Canadian Municipal Journal, October, 1912, p. 388. The tax on 
 transient traders, circuses, etc., has been retained " only for the purpose 
 of regulating the holders from the standpoint of health and morality and 
 public safety." 
 
 * "Special assessments," that is, the building of roads, streets, and 
 sanitary improvements, by taxing the particular landowners whose prop- 
 erty is improved, are very general in western Canada. In Medicine Hat, 
 for example, the property-owners paid two-thirds of the cost of the side- 
 walks on streets (business section), the city one-third of the cost; on the 
 avenues the owners paid one-third, the city two-thirds. The Canadian 
 Municipal Journal, May, 1914, p. 199. 
 
 * Cf. supra, p. 270, note 2, for example.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 278 
 
 TABLE SHOWING THE SOURCES OF TAX REVENUE IN 
 THE PRINCIPAL CITIES OF WESTERN CANADA ^ 
 
 Ciijf 
 
 Popula- 
 tion 
 U911) 
 
 Per cent of value 
 assessed 
 
 Other taxes for local 
 
 Land 
 
 100 
 100 
 
 100 
 100 
 
 100 
 100 
 100 
 
 100 
 
 100 
 100 
 100 
 
 100 
 
 Improve- 
 ments 
 
 purposes 
 
 British Columbia : 
 
 Vancouver 
 
 Victoria 
 
 Manitoba : 
 
 Winnipeg 
 
 Brandon 
 
 Alherta : 
 
 Edmonton 
 
 Calgary 
 
 111,240 
 31,660 
 
 136,035 
 13,839 
 
 24,900 
 
 43,704 
 
 8,050 
 
 5,608 
 
 80,213 
 12,004 
 13,823 
 
 6,254 
 
 66f 
 50 
 
 25' 
 33i 
 
 30 
 25 
 
 452 
 
 15' 
 
 Business tax * 
 Business tax 
 
 Business tax ' 
 
 Lethbridge 
 
 Medicine Hat . . . 
 
 Saskatchewan : 
 Regina 
 
 Business tax, poll, su- 
 perassessment tax ' 
 
 Saskatoon 
 
 Moose Jaw 
 
 Prince Albert.... 
 
 Business, income, and 
 poll taxes 
 
 > Compiled from data in Commercial Hand Book oj Canada, 6000 Factt About Canada, 
 Canadian Year Book, and from letters by the assessors of the resi)ective cities. 
 
 The assessor of Moose Jaw writes that a reduction of the percentage by fifteen per 
 cent will be made annually until the whole value ot the improvements will be exempt. 
 
 ' The reduction of the taxable percentage of improvements since 1911 has been at the 
 rate of fifteen per cent; after 1013 improvements, it was hoped, would be entirely exempt. 
 
 * The tax is levied on the annual rental value of the premises used for business purposes. 
 The rate is six and two-thiids per cent. Licenses also yield a considerable revenue in Winni- 
 peg. 
 
 * The business tax in Brandon is based on the annual rental value of business premises; 
 the rate is ten per cent. 
 
 * In Calgary, the business tax (called personal property tax) is on the basis of the value of 
 the stock. The assessment is made on two-thirds of the average annual amount of stock. Cf. 
 Dixon, The Frogrest of Land Value Taxation in Canada, p. 8. 
 
 ' The basis of the business tax in Lethbridge b fifty per cent of the value of the stock. 
 The poll tax is on single men only, who are not otherwise taxable and are over twenty-one 
 years of age. The superassessment is an assessment of twenty-five per cent over and 
 ftbove the actual value of vacant building property. 
 
 7. In such small communities as the municipalities of 
 western Canada the system of administration and valua-
 
 74 THE TAXATION OF LAND VALUE 
 
 tion does not involve many difficulties. First, as regards the 
 administration, the council and mayor are responsible for 
 the proper assessment and collection of the tax. They 
 appoint the assessor or assessors ^ who prepare the assess- 
 ment roll. To check up their work, the council in many of 
 the municipalities appoints two of its members, who with 
 the assessor constitute the assessment committee. A ma- 
 jority of this committee is sufficient to change the valuation 
 of the assessor. When the roll has been corrected and 
 supervised, notices of the assessment are sent out to the 
 taxpayers. Any person may appeal against the assess- 
 ment to the court of revision, into which the council re- 
 solves itself for the purpose of hearing appeals.^ From this 
 court further appeal is possible to a judge of the court 
 having jurisdiction in that municipality. The assessments 
 are generally made annually, although the council is em- 
 powered to vote to adopt the assessment roll of the pre- 
 ceding year, without undertaking a new valuation. 
 
 The law requires that the land and improvements be 
 assessed separately, the former at its actual cash value, 
 the latter at the cost of replacing such improve- 
 ments at the time of assessment, taking into account the 
 condition of the property, and allowing for any deteriora- 
 tion. In valuing the land, moreover, it is often provided 
 that the location and the purpose for which the land is 
 used or might be used within a reasonable time be con- 
 sidered. In other words, the community influences that 
 affect the value of the land are to be taken into account,' 
 
 1 In many cases the secretary-treasurer of the municipality has been 
 appointed assessor. Cf. The Public Service Monthly, vol. n, September, 
 1913, pp. 8, 9. 
 
 * In British Columbia, the council or five members of the council may 
 sit as the court of revision. One month's notice, by publication in the 
 Official Gazette and a newspaper, is given of the sitting of the court of 
 revision. The members of the court form a quorum and a majority of a 
 quorum may decide all questions of appeal. Year Book of British Columbia 
 (1911), p. 272. 
 
 * In the Alberta law it is even stipulated that when the assessed value
 
 MUNICIPAL TAXATION IN WESTERN CANADA 75 
 
 The assessors are aided in their work of ascertaining the 
 value of the land by the records of sales, and by comparing 
 the quality of the soil, in case of agricultural land, with an 
 average quarter section taken as a standard, and by con- 
 sidering the location of the land with respect to the high- 
 way, railway, and market-places. ^ The land registry system 
 facilitates the valuation. In British Columbia, the right of 
 way, and the improvements thereon, of railway companies 
 are assessed as real property within the municipality.' 
 Crown land under preemption or lease is liable for taxes 
 as if owned. 
 
 Such is the law with respect to valuation. In actual 
 practice underassessment frequently occurs. In some 
 places, e.g., Saskatoon,' the assessors reported an under- 
 valuation of from ten to twenty per cent. Often this was 
 due to the rapid rise of land value. In the recent ebb tide 
 of values, overassessment was frequent. In the Canadian 
 municipalities, however, where the valuation is for local 
 purposes only, uniformity in assessment is of greater im- 
 portance than full value assessment. 
 
 It has been pointed out that in practice the exemption 
 of improvements in western Canada applies to buildings, 
 fences, trees, and other visible improvements, not to filling, 
 grading, clearing from timber, draining, and irrigation, etc.^ 
 In many of the Acts, improvements include "any other 
 
 is either below or above its actual value, the assessed value shall not b 
 changed upon appeal, if such value bears a " fair and just proportion to 
 the value at which the lands in the immediate vicinity of the land are as- 
 sessed." Alberta (1906), c. 63, Pt. xxxi, 5. This clause has recently served 
 an unforeseen purpose in the towns, so that an amendment was necessi- 
 tated. In the fiscal exigency caused by the institution of the Single Tax, 
 the towns interpreted the above clause as legalizing overvaluation of the 
 land. (See infra, 9.) To prevent such interpretation, this amendment 
 was adopted in 1914, " that in no case shall an obviously excessive assess- 
 ment be maintained." Alberta (1914), c. 7, 5. 
 
 ^ Cf. The Public Service Monthly (Sask.), vol. n, September, 1913, p. 9. 
 
 The Year Book of British Columbia (1911), p. 73. 
 
 * Haig, op. cit., p. 59. 
 
 Biillock, in New York Evening Pott, June 27, 1914.
 
 276 THE TAXATION OF LAND VALUE 
 
 increase in value (of the land) caused by any other expendi- 
 ture of labor or capital thereon." Cases do occur of land 
 whose value after clearing has fallen below the cost of 
 clearing and improvement. It is recognized, however, that 
 only so much of the cost of the improvement can be ex- 
 empted as remains unexhausted at the time of valuation.^ 
 Whether the rule is theoretically valid or not, valuers have 
 found it practicable. 
 
 A less common method of assessment exists in Medicine 
 Hat. Under the Act of Incorporation, the council was em- 
 powered to set apart certain sections of the land to be 
 known as improvement districts.^ Within these districts, 
 land which is not being utilized as the demands of the vi- 
 cinity require, that is, unimproved land, may be subject to 
 a superassessment. The council, in case it decides to levy 
 such a superassessment tax, determines the proportion of 
 overvaluation, which is, however, in no case to exceed fifty 
 per cent of the actual value. For example, owner A has 
 a parcel of land valued at $500 which is unimproved. The 
 assessor, by a vote of the council enacting a superassess- 
 ment of twenty-five per cent above the value of the land, 
 enters A's land on the roll at $625. The purpose of this 
 provision is clearly to encourage improvement and to 
 subject the absentee holder to a greater burden of taxa- 
 tion.' Lethbridge also has had such a tax for many years. 
 In 1913, the superassessment was twenty-five per cent 
 above the value of the land. 
 
 When the assessment roll has been completed, the coun- 
 cil fixes the rate of tax. The general rate, when levied on 
 
 * So in Australasia. Cf. supra, chapter m, 4. Cf. also Report of the 
 Royal Commission on Taxation of British Columbia (1911), p. B 25. 
 
 Alberta (1906), c. 63, Pt. xxxi, 5. 
 
 ' The tax assessor of Lethbridge writes: "Some years ago it was no- 
 ticed that a very large proportion of vacant property in the city was held 
 by outside speculators, and the council at that time obtained permission 
 from the Legislature to put a clause in the city charter allowing them to 
 superassess this vacant land within a certain limit of the improved area 
 to the extent of fifty per cent." From a letter to the writer.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 277 
 
 land only is usually not to exceed two per cent of the 
 assessed value. When improvements are taxed, the max- 
 imum rate is in most cases one per cent. In British Colum- 
 bia where improvements are not taxed above fifty per cent 
 of their value, the general rate may not exceed one and 
 one-half per cent. Besides the general rate, school, park, 
 library, hospital, health, and other special rates are levi- 
 able. A tax for paying the interest on the municipal debt 
 may also be raised. Local improvement rates and those 
 special rates to be expended for improvements benefiting 
 particular areas in the municipality are raised by special 
 assessments, that is, the cost of such improvements is 
 charged to the particular property benefited. The principle 
 of "special assessment " is in accord with that of land-value 
 taxation and is well recognized in the systems of taxation 
 throughout Canada.^ A rebate is allowed for the prompt 
 payment of the tax. In case of delinquency in payment 
 interest is charged, and if the tax is not paid usually within 
 three months of the date of notice, lands are liable for sale.' 
 Lands sold for delinquent taxes may be redeemed within 
 one year from the day of sale on payment of the amoimt 
 for which the land was sold plus interest.' 
 
 8. By far the most important fiscal consideration 
 which the system of taxing land value presents is the ade- 
 quacy or productiveness of the tax for all local expenditure. 
 That the real estate tax constitutes an elastic source of 
 revenue is well established. By mere regulation of the rate 
 of tax, the required revenue can be obtained. The aim in 
 taxation is, of course, to keep the rate of tax as low as pos- 
 sible. When, however, improvements are exempted from 
 taxation, and when the land has been assessed at its full 
 value, the rate of tax must be increased to yield the same 
 sum of revenue as before. This increase in rate of tax is 
 
 * See supra, p. 272, note 4. 
 
 Cf. British Columbia (1911), c. 170, 278. 
 
 Cf. Year Book of British Columbia (1911), p. 272.
 
 278 
 
 THE TAXATION OF LAND VALUE 
 
 obviated only under one condition, namely, when the value 
 of the land has appreciated. An illustration will make this 
 clear. Suppose the assessed value of the land in a munici- 
 pality is $200,000, that of the improvements $50,000. To 
 obtain a revenue of $5000, the rate of tax on real estate will 
 be twenty mills. The following year let the improvements 
 be exempt from taxation, and the tax rate will have to be 
 twenty-five mills, unless in the mean time the value of the 
 land has appreciated to $250,000. This was indeed the 
 secret of the fiscal success of this system of taxation in the 
 western provinces before the business depression that set 
 in in 1913. Here the land actually tended to appreciate 
 more rapidly than the expenditure of the municipalities, 
 so that the rate of tax did not need to be raised inordinately 
 when improvements were untaxed. Another noteworthy 
 advantage that rendered this system of taxation more 
 expedient in the western than in the eastern and other 
 densely populated cities, was that in those newer commu- 
 nities the value of the improvements tended neither to 
 increase so rapidly as the land nor to equal the value of the 
 land as in older cities. For example, compare the assessed 
 value of property in Vancouver and Calgary with that in 
 Toronto and Montreal: * 
 
 ASSESSED VALUE OF PROPERTY IN 1912 
 
 Vancouver. 
 Montreal . . 
 Toronto . . . 
 Calgary . . . 
 
 Land 
 
 $138,557,595 
 377,670,560 
 147.668,179 
 102,260.915 
 
 Per cent of 
 total assess- 
 ment 
 
 72.2 
 69.2 
 50.6 
 83.0 
 
 Improvements 
 
 $53,515,295 
 
 260,351.065 
 
 144.131.416 
 
 20,813.620 
 
 Per cent of 
 
 total assesS' 
 
 ment 
 
 27.8 
 40.8 
 49.4 
 16.9 
 
 * Financial and Departmental Reports, Vancouver. B.C. (1912), p. 60; 
 Report of Assessment Department, City of Montreal (1912). p. 4; Man- 
 ual of Calgary; Report on Taxation of Improvements by Assessmeni Com- 
 missioner of Toronto (1912), p. 11.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 279 
 
 By exempting improvements, therefore, the added burden 
 of taxation on land, ceteris paribtis, would be considerably 
 heavier ^ in the eastern than in the western cities. 
 
 The distribution of burden on the individual owners un- 
 der the system of taxing land value, however, is quite 
 another proposition. Clearly, if the rate of tax must be 
 doubled, land with no improvements will be taxed most, 
 land with improvements of the same value as the site will 
 pay the same amount of taxes, while the owner of land 
 whose value falls short of the value of the improvements 
 will pay less than under the realty tax. The shift of burden 
 which the exemption of improvements occasions is appar- 
 ent from the following assumed cases: A, B, C, D, etc., 
 are owners of parcels of real estate, the respective values 
 of which and the amount of taxes payable under the differ- 
 ent systems and rates of taxation are set forth and com- 
 puted in the following table: 
 
 Assessed value 
 
 Realty tax 
 when 
 
 Land-value tax when 
 
 Rate of tax 
 is 15 mills 
 
 Rate is SO 
 mills 
 
 Rate is 20 
 mills 
 
 . (Land $15,000) 
 
 ^ } Building 15,000 J 
 
 T, (Land 15.000) 
 
 " ) Building 5,000 J 
 
 f^ ( Trfind 15,000 ) 
 
 ^ i (vacant) f 
 
 p. (Land 15,000 
 
 ^ } BuUding 20,000 \ 
 
 $450 
 800 
 225 
 525 
 
 $450 
 450 
 450 
 450 
 
 $300 
 300 
 300 
 300 
 
 The above table shows the incidence of the tax un- 
 der various circumstances. Assuming (1) that the same 
 
 * It is very significant, however, that even in an old city such as Mon- 
 treal, the value of improvements does not equal the value of the land. 
 Indeed, the assessment of 1913 shows an increase of $125,259,245 in the 
 value of the land, and an increase of only $28,532,375 in the improve- 
 ments. Cf. Report of Assessment Department, City of Montreal (1913), p. 4.
 
 280 THE TAXATION OF LAND VALUE]! 
 
 amount of revenue must be raised after the institution of 
 the tax on land value as before, and (2) that the value of 
 the improvements in the community just equals that of 
 the land, then the new rate of tax will be thirty mills in- 
 stead of fifteen mills as shown in columns 2 and 3. How 
 will the change in the system of taxation affect the amount 
 of taxes payable by the four proprietors A, B, C, D, each 
 of whom owns tracts of land of the assumed value of 
 $15,000, but under various conditions of improvement? 
 From the table (columns 2 and 8) it will readily be seen 
 that D whose land is best utilized will alone profit by the 
 change from the realty to the land-value tax. His tax bill 
 will be $75 less than before; A will be liable for the same 
 amount; while B and C whose land is kept in a compara- 
 tively undeveloped condition will be more heavily bur- 
 dened than before. 
 
 Suppose, again, that instead of being equal to the value 
 of the land, the value of improvements in the municipaUty 
 is one-third that of the land, as is the case in many of the 
 western Canadian municipalities. Then a rate of twenty 
 mills will suflBce to yield the same revenue as before the 
 institution of the system. The incidence of the burden in 
 that case is illustrated in column 4. Both A and D will pay 
 less; B will pay the same; while C will again be subjected 
 to a higher tax. In other words, the tax on land value fa- 
 vors the owner of the more highly improved land as com- 
 pared with the owner of the less improved land; and the 
 less the increase in rate occasioned by the change of sys- 
 tem, the greater, of coiu*se, is the reUef to the owner of 
 improved property. 
 
 As a matter of fact, the Canadian municipalities were 
 unusually circumstanced in that the adoption of the tax on 
 land value did not necessitate a great increase, if any, in 
 the rate of tax, even in spite of the growing budgets. The 
 reason for this is the important fact that land tended to 
 appreciate so rapidly in value in those communities. The
 
 MUNICIPAL TAXATION IN WESTERN CANADA 281 
 
 truth of this assertion is made evident from the following 
 
 table: 
 
 TABLE SHOWING INCREASE IN THE ASSESSED VALUE 
 OF REAL PROPERTY IN CERTAIN SMALL COMMUNI- 
 TIES, 1912-1913 1 
 
 Locality 
 
 Port Coquitlam, B.C. . . . 
 North Battleford. Sask.* 
 Portage La Prairie, Man. 
 Medicine Hat, Alta.* . , , 
 
 Moose Jaw, Sask.* 
 
 Orillia, Ont 
 
 Milden, Sask 
 
 Bassano, Alta.* 
 
 Point Grey, B.C 
 
 Saskatoon, Sask 
 
 Broadview, Sask 
 
 Canora, Sask 
 
 Assessed value 
 of property 
 
 $6,449,887 
 10,034,137 
 
 4,473,612 
 20,393,950 
 51.997,286 
 
 3,429,080 
 146,000 
 
 1,675,360 
 19,911,318 
 54,463,930 
 604,094 
 
 2,081,600 
 
 Increase over 
 preceding year 
 
 $1,449,887 
 4,454,740 
 365,267 
 13,381,365 
 8,331,988 * 
 500,000 
 54,000 
 243,290 
 5,266,730 
 18,992,515 
 132,421 
 1,155,950 
 
 > Data collected from the "Financial Notes" columns of the Canadian Municipal Jour- 
 nal (1910. 1911, 1912, 1913), and from official letters to the writer. The accuracy of soma 
 of the above figures cannot be vouched for as they are not all official. 
 
 North Battleford will introduce the tax on land value as the sole source of local revenue 
 within two years. {Canadian Municipal Journal, September, 1913, p. 373.) 
 
 * The assessment is on land only. 
 
 * The assessment in Moose Jaw in 1914 fell below that of 1913, the total gross assessment 
 being $50,651,090. Figures taken from a letter by the City Assessor. 
 
 ASSESSMENT AND TAXATION OF TOWN OF BASSANO AND BASSANO 
 SCHOOL DISTRICT FOB THE YEABS 1910 TO 1914 
 
 
 1910 
 
 1911 
 
 i9ia 
 
 191S 
 
 1914 
 
 Assessed valuation 
 in town munici- 
 palities 
 
 Assessed valuation 
 in school district 
 
 Municipal rate, 
 mills 
 
 School rate, mills. . 
 
 $293,325 
 
 Not 
 formed 
 
 10 
 
 Not 
 formed 
 
 $478,736 
 
 478.736 
 
 15 
 
 15 
 
 $1,432,070 
 
 1,432,070 
 
 13 
 
 7 
 
 $1,676,360 
 
 3,169,760 
 
 16% 
 
 2% 
 
 $1,750,435 
 
 3,373.811 
 
 18% 
 
 * The assessment is o 
 
 * The appreciation in 
 Year 
 
 1910 
 
 n land only, 
 the value o 
 
 land in Sas 
 Aiteasment o 
 . $8,639.7 
 . 21,545.7 
 . 86.471.4 
 . 54,463,9 
 . 64,461,3 
 
 katoon is show 
 
 nland 
 
 60 
 
 58 
 
 15 
 
 30 
 
 50 
 
 n below: 
 
 Tax rate (milU) 
 21 
 
 1911 
 
 
 18 
 
 1912 
 
 
 18 
 
 IMS 
 
 
 18 
 
 1914 
 
 
 1714 
 
 (Data furnished the writer by the City Assessor.)
 
 282 
 
 THE TAXATION OF LAND VALUE 
 
 What is thus characteristic of these smaller communities 
 is even more strikingly characteristic of the larger cities, 
 Edmonton, Calgary, Vancouver, and Winnipeg, as shown 
 in the tables on the opposite page. 
 
 In spite of the growth of the towns, therefore, and of the 
 increased expenditure which this growth necessitates, the 
 rate of tax has not had to be increased in many cases. In 
 many cases the rate has even been reduced, while in many 
 more it has had to be increased but slightly.^ 
 
 A few examples of the rate of tax in some of the cities 
 in western Canada are shown below: ^ 
 
 Municipality 
 
 1910 
 
 1911 
 
 1912 
 
 (miUs) 
 
 (mills) 
 
 {mills) 
 
 20 
 
 20 
 
 20 
 
 17 
 
 13.7 
 
 12 
 
 16 
 
 14.5 
 
 12.5 
 
 10.8 
 
 13.25 
 
 12 
 
 , , 
 
 23.5 
 
 15 
 
 15.26 
 
 13.33 
 
 13 
 
 14 
 
 11 
 
 16.5 
 
 10 
 
 15 
 
 13 
 
 
 16 
 
 7 
 
 21 
 
 18 
 
 18 
 
 18 
 
 18.1 
 
 15.88 
 
 26.25 
 
 24 
 
 21 
 
 1913 
 {mills) 
 
 Vancouver 
 
 Edmonton 
 
 Calgajy 
 
 Winnipeg 
 
 Kelowna 
 
 Prince Albert . . . 
 
 Medicine Hat. . . 
 
 Bassano : 
 Municipal rate 
 School rate . . . 
 
 Saskatoon 
 
 Begina 
 
 Victoria 
 
 20 
 
 16 
 
 18.75 
 
 13 
 
 17.6 
 
 11 
 
 15 
 
 16.5 
 2.6 
 18 
 14 
 20 
 
 The significance of the above table may be summarized 
 thus : First, in 1913, even though the depression had set in, 
 the maximum rate of tax did not exceed two per cent. Sec- 
 ondly, in five of the cities the rate was either reduced or 
 
 * This enormous appreciation in land value from year to year is not 
 only responsible for the abolition of other taxes in the municipalities, but 
 also for the excessive indebtedness incurred by the western towns because 
 a surplus revenue leads to extravagance in public expenditure. Thus 
 while public improvements tend to enhance the value of land, so the latter 
 in turn becomes itself the cause of the public outlays for improvement. 
 
 * Data gathered from various sources, chiefly, however, from the re- 
 plies to the questionnaire.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 283 
 
 TABLE SHOWING INCREASE IN THE VALUE OF TAXABLE 
 PROPERTY IN CALGARY, EDMONTON, AND WINNIPEG* 
 
 
 Assessed value of taxable property 
 
 Year 
 
 
 
 
 Calgary 
 
 Edmonton 
 
 Winnipeg 
 
 1901 
 
 $2,307,040 
 
 $1,395,912 
 
 $26,405,770 
 
 190 
 
 2,383,325 
 
 1,724,420 
 
 28,615,810 
 
 1903 
 
 8,221,549 
 
 3,208,100 
 
 86,273,400 
 
 1904 
 
 4,099,437 
 
 8,959,648 
 
 48,214,950 
 
 1905 
 
 5,433,469 
 
 6,620,985 
 
 62.727,630 
 
 1906 
 
 7,771,921 
 
 17,046.798 
 
 80,511,725 
 
 1907 
 
 12,832,496 
 
 21,985,700 
 
 93,825.960 
 
 1908 
 
 17,941.698 
 
 22,535,210 
 
 116.106,390 
 
 1909 
 
 19,824,978 
 
 25,584,990 
 
 107,997,320 
 
 1910 
 
 80,796,092 
 
 80,105.110 
 
 157,608,220 
 
 1911 
 
 52,747,600 
 
 46,494,740 
 
 172,677,250 
 
 1912 
 
 112,559,400 
 
 128,475,070* 
 
 214,360,440 
 
 * This enormous increase of nearly 300 per cent in assessable value is in part due to the 
 annexation to Edmonton in 1012 of the suburban town, Stratbcona. 
 
 TABLE SHOWING THE PHENOMENAL GROWTH OF VAN- 
 COUVER IN POPULATION AND IN VALUE OF ITS LAND 
 AND IMPROVEMENTS* 
 
 Year 
 
 Popula- 
 
 Per 
 
 cent of 
 
 Assessed 
 
 Per cent 
 
 Assessed 
 value of 
 
 Per cent 
 increase 
 
 tion 
 
 in- 
 crease 
 
 value of land 
 
 of increase 
 
 tmprove- 
 ments 
 
 1887 
 
 5,000 
 
 
 $2,456,842 
 
 
 $182,235 
 
 
 1891 
 
 13,685 
 
 174 
 
 10,477,420 
 
 826 
 
 1,501,665 
 
 724 
 
 1895 
 
 17,862 
 
 81 
 
 13,829,724 
 
 82 
 
 4,817,660 
 
 187 
 
 1899 
 
 24,000 
 
 S5 
 
 12,705,099 
 
 decrease 
 
 5,011.190 
 
 16 
 
 1903 
 
 84,484 
 
 44 
 
 13,845,565 
 
 9 
 
 9,091,270 
 
 81 
 
 1907 
 
 60,100 
 
 74 
 
 88,346,335 
 
 177 
 
 16,381,475 
 
 80 
 
 1911 
 
 111,240 
 
 85 
 
 98,720,345 
 
 158 
 
 37,858,660 
 
 131 
 
 1912 
 
 122,100 
 
 9 
 
 138,557,545 
 
 43 
 
 58,515,295 
 
 41 
 
 * For Calgary, cf. Annual Report of City of Calgary, Alta. (1912), p. 10; 
 for Edmonton, City of Edmonton, Ninth Annual Report, Financial and 
 Departmental, p. 365; Winnipeg, Municipal Manual (1918'), p. 137. 
 
 * Corporation of the City of Vancouver, B.C., Financial and Departmental 
 Reports (1912).
 
 284 THE TAXATION OF LAND VALUE 
 
 remained the same throughout the four years* period; in 
 the other six municipahties only a slight increase, or slight 
 fluctuation, in rate is noticeable. Thirdly, in the five cities 
 relying on the land as the sole source of revenue, the max- 
 imum rate of tax was twenty mills, the minimum fifteen 
 mills. Kelowna required a rate of fifteen mills when im- 
 provements were taxable, a rate of seventeen and three- 
 fifths when improvements were exempt. The fact that in 
 Vancouver, since 1906, the rate of tax continued to be 
 twenty mills shows that the complete untaxing of im- 
 provements which was instituted in 1910 did not occa- 
 sion an increase in rate. Where the value of land rises so 
 enormously as to obviate an increase in rate of tax, the 
 substitution of the tax on the unimproved value of the land 
 for that on realty will not only relieve the owner of im- 
 proved land, but will add only slightly, if at all, to the 
 burden of unimproved land. 
 
 9. Before the recent industrial crisis set in it would 
 have been possible to say that the adoption of the tax on 
 land value, even as a single tax, was highly expedient in 
 western Canada, from the standpoint of both elasticity 
 and productiveness. In fact, under the conditions dis- 
 cussed, elasticity is not an unmixed good. The unwill- 
 ingness to reduce the tax rate leads to extravagance in 
 expenditure. The tax, however, is self-sufBcient, where, 
 as in the municipalities of western Canada, the value 
 of the land is an ever-increasing source of revenue. And 
 it is for this reason that the other taxes, such as burden 
 industry or labor can be dispensed with. 
 
 The results of the industrial depression have been seized 
 
 upon by the adversaries of the Single Tax. We are in this 
 
 section concerned only with the fiscal aspect of the land 
 
 tax. What, then, has been the effect of the present 
 
 "slump" in land value on the municipal tax system? ^ 
 
 ^ My conclusions are drawn particularly from Dr. Haig's study. The 
 investigation was made on the spot, in 1914, during the depression. And 
 in the first part of his book he has put the results of the study in a 
 form which makes it in a sense source material.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 285 
 
 To appreciate the industrial situation in western Canada, 
 the abnormally speculative values of land before 1913 
 must be called to mind. Also the fact that the stagnant 
 condition of the realty market left many realty operators 
 with a large number of holdings on their hands, land yield- 
 ing no income, yet on which taxes had to be paid. "The 
 economic condition of Saskatoon is much more serious than 
 the people realize. They expect the present depression to 
 be relieved very soon; but relief will not come for many 
 years. The fundamental richness of the country cannot 
 be denied; but the values of the city real estate anticipate 
 the far distant future. The distant future will take care 
 of itself very nicely; the immediate present is another 
 question. Many men who counted themselves rich two 
 years ago and who did not get rid of their real estate are in 
 real distress. An acquaintance who owns a half section laid 
 out in lots within the city Umits confided that he was 
 greatly worried about his grocery bill. With taxes due on 
 a piece of land assessed at $20,000, *I, myself, do not know 
 where in the world to get the money to pay them with.' 
 The heavy land tax makes it difficult to carry vacant land. 
 Every one feels it. Up to this time people have paid abso- 
 lutely no attention to taxes; they have been an unimpor- 
 tant detail. People paid them cheerfully. There has been 
 no public discussion about them and they have not entered 
 into calculations. Now, for the first time, attention is being 
 called to them. It is foolish to say that land has not de- 
 preciated in value. The bottom has entirely fallen out of 
 the market. No prices are being quoted," etc.^ Or, "Ed- 
 monton has not been so hard hit as other cities by the 
 present depression. There is more building going on there 
 than in other places. Most of the distress is being experi- 
 enced by people who are loaded up with vacant property 
 which is not good security for loans. Many people bought 
 up the land at high prices expecting to pay but one install- 
 * Haig, OTp. cit., p. 69.
 
 286 THE TAXATION OF LAND VALUE 
 
 ment and to sell at an advance before further payments 
 became due. With the bottom out of the real estate market 
 such people are finding difficulty in paying interest, the 
 second installment and the taxes on their property. The 
 Hudson's Bay Company is experiencing difficulty in its 
 attempt to collect the second installments on the land sold 
 in their great sale a few years ago. Many persons would 
 gladly sacrifice their first payment if the company would 
 take the lands off their hands; but this the company re- 
 fuses to do. Some of the property in town has a value which 
 is greatly inflated. Many of the subdivisions will doubtless 
 decrease enormously in nominal value in the near future." ^ 
 In Calgary also, in spite of the speculation promoted by 
 the discovery of petroleum in 1913, the realty market has 
 been inactive.^ 
 
 Nevertheless, admitting the hardships created by the 
 heavy taxation of land, especially to the owners of vacant 
 property, the fiscal effects have not been serious.^ In Cal- 
 gary, for example, the fact of business depression is estab- 
 lished by the decHne in bank clearings from 275 millions 
 in 1912, to 247 millions in 1913, and to 201 millions in 
 1914. At the same time the total tax base increased from 
 111 millions in 1912, to 133 millions in 1913, and to nearly 
 135 milUons in 1914; while the total rate of tax had to be 
 increased from 12.5 mills to 18.75 and to 20.75 mills during 
 the same period. But this increase in rate loses significance 
 when we consider that 12.5 mills levied in 1912 was the 
 lowest rate since 1895, and that the rate of tax was 22 mills 
 during 1904-06 and 21.5 mills in 1909. Moreover, the re- 
 ceipts from the property tax were nearly twice as great in 
 1913 as in 1912.* In Saskatoon, likewise, the net assess- 
 ment (including business and income) increased from 36.8 
 
 1 Haig, op. cit., pp. 105, 106, 118. = /^VZ., p. 110. 
 
 ' It is necessary to point out that in New York City the realty tax has 
 had similar serious effects during the recent depreciation in land value, 
 and has given rise to widespread discontent with the present tax system. 
 
 * Ibid., pp. Ill, 117.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 287 
 
 millions in 1912 to 56.2 millions in 1913 and to 56.6 millions 
 in 1914; the tax rate was reduced from 19.5 mills in 1912 
 to 18.4 mills in 1913 and to 17.55 mills in 1914; while the tax 
 levies were as follows: $666,812, $1,014,667, and $993,037 
 in the three years, respectively.* 
 
 Turning to the three largest "Single Tax" municipali- 
 ties, we find the fiscal conditions were somewhat less favor- 
 able, as appears from the subjoined table.^ Yet only in 
 
 Taxable value: 
 
 1912 
 
 1913 
 
 1914 
 
 Tax rates: 
 
 1912 
 
 1913 
 
 1914 
 
 Tax levies: 
 
 1912 
 
 1913 
 
 1914 
 
 Vancouver 
 
 $138,557,595 
 144,974,525 
 150,456,660 
 
 20 mills 
 20 " 
 22 " 
 
 $3,078,749 
 8,217.466 
 8,677,160 
 
 Edmonton 
 
 $123,475,070 
 188,539,110 
 191,283,970 
 
 12 mills 
 16 " 
 17.5 " 
 
 $1,530,205 
 3,471,444 
 3,769,970 
 
 Victoria 
 
 $71,670,770 
 89,130,150 
 89,151.990 
 
 mills 
 
 21 
 20 
 22.35 
 
 $1,313,248* 
 1,466,797* 
 
 * Receipts yielded by the land tax and constituting about half of the total budget. The 
 frontage and special assessment taxes almost equaled the yield of the land tax in 1913. 
 See Haig, op. cit., pp. 225, 22&-31. 
 
 Vancouver did the tax rate reach the high water mark for 
 that city. In both Edmonton and Victoria higher rates 
 had been levied in preceding years. The tax rate for Ed- 
 monton was 21.5 mills in 1901, for Victoria, in 1909, it was 
 26.5 mills. There are, however, other fiscal data to offset 
 this favorable showing. Thus, in 1913, the first time in 
 many years, the budget account of Vancouver showed a 
 deficit of $223,956. In Edmonton, also, there was an 
 excess in deficit in the general fund over 1912 by about 
 $30,000.' Again, the arrears in payment of taxes have 
 grown since 1913 to an alarming extent in some of the com- 
 
 Haig. op. cit., pp. 58-60. Ibid., pp. 92-93; 190-95. 
 
 Ibid., pp. 88, 180-81.
 
 288 THE TAXATION OF LAND VALUE 
 
 munities, reflecting the general depression in land value.* 
 Furthermore, the increase in the number of appeals against 
 assessments and the greater value of the assessed property 
 in 1913 and 1914 indicate an overvaluation of the land.' 
 Overassessment is not an unusual occurrence in a time of 
 transition and readjustment of values. The business de- 
 pression, moreover, interfered with the contemplated 
 public improvements and made retrenchment necessary 
 in many communities.' Nevertheless, if we discount the 
 fiscal stringency, which, we must not overlook, prevailed 
 also in other Canadian and in American cities during the 
 same time, the land-value tax, not as the single tax, how- 
 ever, seems to have stood the test even in a period of declin- 
 ing values. Nor must it be overlooked that whatever com- 
 plaints may have been voiced and demands made to extend 
 the tax base, no municipal council, nor provincial legisla- 
 ture, has thus far been induced by necessity to abandon 
 the system of exempting improvements.^ 
 
 * Cf. Haig, op. cit., p. 94. Sales of property for taxes, although unpopular, 
 were declared very generally throughout the western provinces during 1914 
 and 1915. The lax enforcement of law in British Columbia which per- 
 mits the taxpayer to be in arrears several years before he can lose his 
 property has been blamed for the excessive arrears recently. It was found 
 that the redemption of properties sold for taxes in 1914 proceeded fairly 
 and that only a small percentage was likely to be forfeited in British Co- 
 lumbia. At a tax sale held in North Vancouver in 1914, 276 parcels were 
 cflfered for sale. Of this niunber all but 38 parcels were redeemed at the 
 close of the redemption period of one year. The maredeemed parcels 
 were worth four per cent of the total arrears, and among them were 
 several bad titles. Again it was reported that while bidding at the sales 
 in British Columbia was brisk on good residential property, business 
 property in most cases fell to the municipality. Canadian Munid'pal 
 Journal (1915), pp. 132, 240, 352, 388, 313. 
 
 * Cf. Wade, Single Tax in Western Canada, in National Tax Associa- 
 tion Proceedings (1914), p. 428. In British Columbia, in 1915, a reduc- 
 tion of about fifty per cent was made in the undeveloped districts. Cf. 
 Canadian Municipal Journal (1915), p. 436; also p. 313. 
 
 Cf Ibid., pp. 53, 437. 
 
 * The fact that the Union of Alberta Municipalities in 1912 and 191S 
 refused to vote for the repeal of the system of land-value taxation is 
 likewise good evidence of the expediency of the tax. Cf. Haig, op. cit., 
 pp. 80. 84.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 289 
 
 The experience with the Alberta Town Act of 1912, how- 
 ever, proves convincingly the inexpediency of instituting 
 the new system during a period of falling land value, or of 
 introducing it too suddenly in static, unprogressive com- 
 munities. ^ Enough has been said about the economic con- 
 ditions under which the land tax can be instituted success- 
 fully to make explicable the embarrassment of the towns 
 in Alberta when the provincial enactment was passed 
 providing for the taxation of land value to the exclusion 
 of all other taxes for local purposes. Of the forty-six towns 
 affected by the legislation only one had as large a popula- 
 tion as 3,000. In some of these local bodies the change was 
 made without fiscal stress; in the majority of cases, how- 
 ever, the untaxing of buildings and the exempting of per- 
 sonalty necessitated a considerable increase in the tax rate. 
 In some of the towns the tax rate had to be raised about 
 one hundred per cent or more. For example, in Ponoka, 
 the rate was more than doubled, from eighteen mills in 
 1911 to forty-five and five-tenths mills the following year; 
 in Leduc the advance was from twenty to forty-two mills. 
 Local conditions in these cases and in others aggravated 
 the financial stringency that ensued.^ Illegal means, such 
 as overassessment, excessive frontage taxes, other special 
 assessments, etc., had to be resorted to in order to raise 
 the requisite revenue. In fact, the amendments to the Act 
 in 1913, providing for a frontage tax, not to exceed ten cents 
 per foot of frontage, and a business tax ' are evidence of 
 the impracticability of a general enactment which disre- 
 gards the differences in local conditions and local needs. 
 In passing judgment upon this instructive experience in 
 Alberta, it must not be forgotten that the change involved 
 more than the untaxing of buildings, and that the latter 
 is yet in force in the towns. 
 
 * For an excellent and detailed account of the effects of this legisla- 
 tion see Haig, op. cit., pp. 129 ff. 
 
 * In some towns, the exemption of the land owned by the railway com- 
 panies was the cause of the narrow tax base. C/. ibid., p. 14*. 
 
 Alberta (1913), c. 8, 13 (1st sess.); c. 22, 14 (2d sess.).
 
 290 THE TAXATION OF LAND VALUE 
 
 10. Granted that the fiscal adequacy of the land tax 
 in western Canada has been estabhshed, its expediency 
 must be tested further by the criterion of incidence. With- 
 out attempting to discuss the justice of the distribution of 
 burden, it is necessary to point out and examine certain 
 data widely employed to show: (1) that under the system 
 of local taxation in western Canada a small percentage of 
 the population, the landowners, bear the whole burden of 
 the local budgetary requirements; ^ (2) that the untaxing 
 of buildings shifts the burden from the more fortunate 
 owner of the skyscraper to the owner of vacant property; 
 (3) that the rich owner therefore profits at the expense of 
 the poor home-owner; and (4) that the system favors the 
 rich landlord also in that he is exempted from more taxes 
 proportionately than the landless resident.^ 
 
 Briefly, the first point made above is directed against 
 the Single Tax feature of the system with which we are 
 not here concerned. Whether improvements are taxed or 
 untaxed, the number of taxpayers in a community, where, in 
 the main, house and lot are owned by the same person, will 
 remain practically the same. It is significant, neverthe- 
 less, that the percentage of property owners in the western 
 municipalities is notably high. In Regina, for example, 
 about sixty-five per cent of the houses are inhabited by the 
 owners, in Vancouver and Saskatoon about sixty per cent, 
 in Edmonton from sixty to sixty-five per cent, in Calgary 
 about sixty-six per cent.' And since many of the tenant 
 
 ^ Wade, Experiments with the Single Tax in Western Canada, pp. 12, 
 16. " But under the so-called Single Tax only one citizen in five (in Van- 
 couver) pays for the civic upkeep, while four in five escape the burden 
 altogether. Twenty-two thousand pay the way for 114,200, and 92,000 
 comfortably escape all responsibility." The basis for Wade's comparison 
 is surely incorrect. Had he compared the number of taxpayers with the 
 number of voters, instead of with the total population, the ratio would 
 have been more faithful to the facts. 
 
 * " In other words, about seventeen-eighteenths of the exemption is in 
 favor of the wealthier classes, and one-eighteenth in favor of those not so 
 well provided." Wade, The Single Tax Failure in Vancouver, pp. 6-6. 
 
 Haig, op. cii., pp. 63, 100.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 91 
 
 occupiers may own unimproved or other property in the 
 town the percentage of taxpayers even exceeds the high 
 percentage of home-owners. With regard to the second 
 contention raised, the untaxing of buildings did shift the 
 burden of the tax from the owner of the skyscraper to the 
 owner of vacant property. But that was exactly the pur- 
 pose of the change. It was intended to make the owner of 
 unimproved land contribute a larger quota to the local 
 revenue, either because such owner was often a non-resi- 
 dent, pocketing the value increment of the land, or was 
 a resident speculator. The latter, indeed, convinced of the 
 beneficent effects of the system on the community, which 
 would be reflected in the rapidly rising land values, was 
 himself responsible for the institution of land-value taxa- 
 tion. As a matter of fact, in times of rising values, the 
 speculator was affected only slightly by the added burden. 
 
 The charge that the exemption of improvements im- 
 poses a greater burden on the home-owner than under the 
 realty tax can apply only to owners of buildings the value 
 of which falls below the average ratio prevailing between 
 the value of the improvements and that of the site. Where 
 that ratio is about thirty per cent or less as in the western 
 towns, very few resident owners have been adversely 
 affected by the change. In fact, we have seen that in very 
 many cases, the untaxing of buildings did not even neces- 
 sitate a higher tax rate. Finally, the charge that the exemp- 
 tion of the wealthier class from taxation is relatively 
 greater than that of the working class loses weight when we 
 reflect that (1) under the Single Tax system the landless 
 workman escapes all local taxes, and that (2) the relief from 
 taxation afforded to owners of business premises and build- 
 ings was expected to revert indirectly to the community 
 in the form of social and economic benefits. This leads us 
 to inquire what the economic effects have been. 
 
 11. In venturing to trace in social phenomena the 
 effects of a tax, the general principle must not be lost sight
 
 292 THE TAXATION OF LAND VALUE 
 
 of, namely, that numerous forces are at work in society, 
 and that social phenomena are the resultant of the interplay 
 of a variety of causes. This was pointed out in the case of 
 the Australasian taxes. Indeed, so similar are the con- 
 ditions in both countries, that the conclusions with regard 
 to the social and economic effects of the tax in Australasia 
 hold true in the case of the Canadian system. So remark- 
 able has been the development of the towns, so great the 
 influx of population, so favorable the industrial oppor- 
 tunities, so rich the natural resources, that the influences 
 of the tax on land value, whether salutary or otherwise, 
 have been scarcely noticeable or traceable. 
 
 Nevertheless, it is generally admitted even by the oppo- 
 nents of the system^ that the exemption of improvements 
 has given an impetus to building operations in western 
 Canada. In the provinces this opinion is especially gen- 
 eral; and the prodigious increase in building operations in 
 recent years, especially in the localities where all improve- 
 ments are exempt, is attributed in part to this cause. ^ A few 
 examples showing the great expenditures made for build- 
 ing purposes, although not necessarily evidence of the in- 
 fluence of the tax system, will disclose the general situation 
 of prosperity and rapid development of the western com- 
 munities before the depression which began in 1913. 
 
 While the real cause of this unmistakable trend in build- 
 ing operations Ues in the enormous increase in population, 
 it is the costliness of the structures, not the number, that 
 may reflect the influence of the exemption of improvements 
 from taxation. Take Saskatoon, for example. In 1911, the 
 population was about 12,000; yet the amount expended on 
 
 * Cf. Bullock, " Single Tax in Vancouver," in the New York Evening 
 Post, June 27, 1914. Also Wade, The Single Tax Failure in Vancouver, 
 p. 13. 
 
 * Letters received by the writer from Medicine Hat, Moose Jaw, 
 Prince Albert; seeSingle Tax Review, May-June, 1911, pp. 10 jf., on effect 
 of the tax on the building trade in Vancouver, and for Edmonton, see 
 ibid., November-December, 1910, p. 48.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 293 
 
 TABLE SHOWING THE COST OF NEW BUILDINGS IN CER- 
 TAIN PROGRESSIVE TOWNS IN WESTERN CANADA 
 
 Year 
 
 Vancouver 
 
 Edmonton 
 
 Winnipeg 
 
 Calaary 
 
 Saskatoon 
 
 Victoria 
 
 1907.... 
 1908.... 
 1909.... 
 1910.... 
 1911.... 
 1912.... 
 1913.... 
 
 $5,632,744 
 5,950,893 
 7,258,565 
 13,150,365 
 17,652,642 
 19,388,322 
 10,424,197 
 
 $2,280,210 
 2,549,847 
 2,128.166 
 2,159,106 
 3,672,260 
 
 14,446,810 
 9,242,450 
 
 $6,309,950 
 5,513,700 
 9,226,325 
 15,116.450 
 17,550,400 
 20,563,760 
 18.593,350 
 
 $2,094,264 
 1.004.520 
 2,420.450 
 5,589.594 
 12,907.638 
 20.394.220 
 8,619,653 
 
 $377,211 
 115,625 
 1,002,055 
 2,817,771 
 5,028,366 
 7,640,530 
 2.563.885 
 
 $1,490,250 
 1,314,240 
 1,773,420 
 2,373,045 
 4,126,315 
 
 10,666,206 
 4,037,092 
 
 buildings in five years, 1907-11, was over nine million 
 dollars.^ But especially noteworthy are the enormous sums 
 expended on new structures during 1911-12, over $12,600,- 
 000! These were years when the reduction was made in 
 the assessment on improvements. But that this reduction 
 was not alone responsible for the building activity is clear, 
 for the activity slackened considerably in 1913 in spite of 
 a further ten per cent reduction on the assessment of im- 
 provements.' The rapid development of Saskatoon is 
 borne out also by the following quotation:* "The city, 
 although only ten years of age, has gotten past the shanty 
 stage. Brick, stone, concrete, steel are the materials used 
 in the construction of its houses." In Vancouver, in 1910, 
 the first year under complete land- value taxation, the in- 
 crease in the number of building permits was about ten 
 
 * Vancouver's Financial and Departmental Reports (1912) ; Winnipeg's 
 Municipal Manual (1913); Annual Report of Calgary (1912); British 
 Columbia Year Book (1911), p. 322; Canadian Municipal Journal, July 
 1913, p. 252 et passim; Eighth Annual Report of the Department of Agri- 
 culture of the Province of Saskatchewan (1912), p. 135. 
 
 * In 1912, the population had more than doubled, i7,5i7 persons, and 
 there were 1783 permits granted for new buildings. It is noteworthy that 
 in all the mimicipalities of Saskatchewan, in 1912, the total value of the 
 new buildings was $33,270,781, as compared with $17,857,308 in 1911. 
 Eighth Annual Report of the Department of Agriculture of the Province of 
 Saskatchewan (1912), p. 135. 
 
 * By that time the business depression had set in and may have been 
 a counteracting influence in the situation. Cf. Haig, op. cit., p. 270. 
 
 * Canadian Municipal Journal, December, 1913, p. 484.
 
 294 
 
 THE TAXATION OF LAND VALUE 
 
 per cent, the growth in the value of building operations was 
 about eighty-one per cent. The high per capita value of 
 new buildings in 1912, the crest of the flush period, is 
 shown in the subjoined table: ^ 
 
 TABLE SHOWING THE RELATION OF BUILDING OPERA- 
 TIONS TO POPULATION AND TO IMPROVEMENT EX- 
 EMPTION IN 1912 
 
 Municipality 
 
 Population 
 
 Value of 
 
 new 
 buildings 
 
 Taxable per- 
 centage of 
 improvements 
 
 Value of 
 
 neti 
 buildings 
 per capita 
 
 Vancouver 
 
 Edmonton 
 
 Winnipeg 
 
 Calgary 
 
 Saskatoon 
 
 Victoria 
 
 122,100 
 53,383 
 
 166,553 
 70,000 
 27,527 
 65,000 
 
 $19,388,322 
 14,446,819 
 20,563,750 
 20,394,220 
 7,640,530 
 10,666,206 
 
 66% 
 25 
 
 $158.8 
 270.6 
 123.4 
 291.3 
 277.5 
 164.0 
 
 It is perhaps safe to attribute the stimulus to building, 
 in part at least, to the exemption of improvements. What 
 is to be said, however, of the desirability of such an 
 effect? Statistics of the number of vacant dwellings in the 
 western cities are not available. Nevertheless, we may 
 agree with an authority that "Vancouver is badly over- 
 built." 2 About the condition in the other municipalities data 
 are lacking. Now, on the part of the building operator ' 
 excessive overbuilding cannot be continued indefinitely. 
 
 ^ That other factors entered in as well as the exemption of improve- 
 ments is seen in the wonderful progress of Calgary, where although im- 
 provements are liable to taxation to twenty-five per cent of their value, 
 and although the population was only slightly more than half that of Van- 
 couver, the value of its buildings exceeded by one million dollars that in 
 Vancouver. 
 
 * Haig, op. cit., p. 204. 
 
 In western Canada the builder is usually not the speculator, as in 
 Grerman cities, operating except, for a small margin, with borrowed capi- 
 tal. Loans on real estate are conservatively financed in the western 
 provinces. C/. ibid., p. 274.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 295 
 
 It is comprehensible how during a period of expansion 
 the expectancy of a larger influx of immigrants, together 
 with the relief from taxation, could induce an overproduc- 
 tion of structures, but as in all forms of overspeculation 
 the collapse must follow. 
 
 From the standpoint of the tenant, on the other hand, 
 even in Vancouver the large supply of vacant houses ^ did 
 not prevent exorbitant rentals during the boom; nor an 
 inordinate decline in rents during the depression. The 
 movement of rents, indeed, must be explained on other 
 grounds than the overstimulation of building. With the 
 daily influx of new settlers seeking dwellings, and with 
 speculation in property rife, the tendency for rents to 
 increase is easily explained.^ The opposite tendency ensued 
 with the advent of stagnancy in the land market and with 
 the exodus of people seeking employment elsewhere. In 
 so far, then, as other causes operated, the tax on land value 
 at the rates levied was ineffective in determining rents and 
 the market price of the land. The determination of the inci- 
 dence of the tax is likewise impossible, for in a time of 
 fluctuating, inflated land value the tenant probably pays 
 part of the artificially screwed-up value, including the 
 tax. In a period of declining values, on the other hand, the 
 owner is in the weaker position and is less likely to shift 
 the tax. 
 
 Again, whether the impetus to building is to be judged 
 salutary or deleterious will depend on the kind of con- 
 struction promoted. Was the erection of residence houses 
 
 ^ There has been a decrease in the population of Vancouver since 
 1913. The number fell from 122,000 in 1912, to 114,220 in 1913, and to 
 106,110 in 1914. It may, therefore, be that Dr. Haig's statement and Mr. 
 Wade's statistics of overbuilding do not apply to 1912 at all. Cf. Haig, 
 op. cit., pp. 204, 208. 
 
 * Statistics gathered from the three principal cities of Saskatche- 
 wan show an increase in the rent for an ordinary furnished room in a 
 private house from $10 in 1910 to $12 and $14 per month in 1912. 
 Cf. Eighth Annual Report of the Department of Agriculture (Sask., 1912), 
 p. 161.
 
 896 THE TAXATION OF LAND VALUE 
 
 stimulated, or of tenements? And how was the general 
 condition of congestion affected? In Vancouver there 
 were constructed, in 1912, 217 apartment houses with a 
 value of over six millions, and 2226 dwelling-houses costing 
 over three millions; in the same year in Victoria were 
 erected 1312 one- to two-story dwellings, exclusive of brick 
 or concrete buildings, and 32 apartment houses.^ Even 
 without available data for comparison, the large number of 
 new dwelling-houses in a single year would lead one to think 
 that the incentive to residence building was no less than 
 to apartment construction. Some evidence was quoted, 
 e.g., the subdivision of lots, and the reduction in the num- 
 ber of purchasers of lots for garden and yard purposes in 
 Vancouver,^ to show a more economical use of land as a re- 
 sult of the tax. Whether this tendency of a more intensive 
 use of the land was evident before the depression was not 
 stated. On the other hand, the phenomenon of narrow, 
 twenty-five foot lots in some of the cities has been attrib- 
 uted to local conditions. For example, "The high cost of 
 land and the necessity of being served by local improve- 
 ments has operated to cause Regina to be less scattered. 
 . . .** In Victoria, on the contrary, a "Single Tax" city, and 
 with a relatively smaller area and greater density of popu- 
 lation than the other cities of western Canada, the prevail- 
 ing standard lot is the fifty-foot parcel.' In short, conges- 
 tion not being a problem in these western communities, 
 little can be gathered with regard to this matter which 
 reflects the effect of the land tax. 
 
 12. As to the other results which logically might have 
 been expected to follow, even less can be proved from the 
 economic conditions in the western provinces. Taking up 
 the question of speculation in land, we will ignore the pres- 
 ent unfavorable status of the land market as it is causally 
 
 Haig, op. cii., pp. 200, 23S-S4. 
 
 Ibid., p. 197. 
 
 Ibid., pp. 48, 236.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 297 
 
 unrelated to the land tax. Until 1913, then, it would have 
 been impossible to show that the speculator had been de- 
 terred in his operations in western Canada on account of 
 the land tax. For it is not surprising to find speculation 
 rampant in a country where the appreciation of the value 
 of land has been so extraordinary. Nor will the specula- 
 tion mania ^ cease, so long as the tax fails to appropriate 
 the entire profit. Thus, while it may be assumed that the 
 increased building operations are a sign of the better utiliza- 
 tion of town land, the tax has surely not been prohibitive 
 of property in vacant land, because the enormous value 
 increment, the result of overcapitalization of the land, 
 makes the payment of a two per cent tax, or less, a trifling 
 matter in the calculations of the speculator. Therefore it is 
 not surprising that in spite of the tax there are 26,763 
 vacant lots in Calgary, Alberta, which have sewerage and 
 water facilities; yet working men are compelled to go out- 
 side the city limits to buy land on the prairie for homes.^ 
 As an official said, at times of land "booms" and "ficti- 
 tious" values, the assessment is seldom considered. Nor 
 can the disintegration of the large landholdings, to which 
 the following quotation is testimony, be attributed to the 
 influence of the taxing system alone. " Many of the most 
 fertile valleys were monopolized by a few individuals, who 
 owned from 1000 to 30,000 acres. . . . These big estates 
 are now being subdivided and sold in small parcels, with 
 the result that small farms and orchards are becoming 
 numerous on ground which was held for years as pasture 
 or merely for purposes of speculation. The breaking-up of 
 these large ranches is one of the most hopeful signs of the 
 
 * The treasurer of Brandon, Man., writes: "In this part of the world 
 we are subject to periods when there is a big demand for land and very 
 large sums of money change hands in the speculation in land. At such 
 times as these every one is land mad and lands change hands in many 
 cases at ridiculous prices." See also for description of enormous realty 
 transactions, London Ecanomui, May 3, 1913, p. 1039. 
 
 * Canadian Municipal Journal, August, 1914, p. 832.
 
 298 
 
 THE TAXATION OF LAND VALUE 
 
 times." * On the whole, nevertheless, speculation con- 
 tinued unabated as before, and in spite of the institution of 
 the new system of taxation; but absentee owners and spec- 
 ulators in vacant property contributed a greater share than 
 before to the pubHc revenue. 
 
 The increase in wages and the unusually high rates of 
 wages in western Canada before 1913 ^ can be only re- 
 motely, if at all, traceable to the operation of the land tax. 
 Wages in the building trade had undoubtedly advanced on 
 account of the activity in that trade. So had the wages of 
 common labor, both in the towns and on the farms. How- 
 ever, since the prices of food and lodging had also ad- 
 vanced, and since labor was scarce, the increase in wages 
 must be attributed rather to the general prosperity of the 
 country, which the tax on land value may have slightly, 
 if at all, furthered. On the other hand, if the building 
 activity is attributed at all to the land tax, the latter must 
 also bear the blame for the abnormal condition of unem- 
 
 * Bureau of Provincial Information, Agriculture in British Columbia 
 (1912), Official Bulletin 10, p. 14. 
 
 * The following table, from the Eighth Annual Report of the Depart- 
 ment of Agriculture (Sask., 1912), p. 162, shows the increase in wages in 
 Saskatchewan since 1910: 
 
 Trade or calling 
 
 Bricklayera 
 
 Carpenters 
 
 Electricians 
 
 Plumbers 
 
 Plasterers 
 
 Painters 
 
 Woodworkers 
 
 Building laborers. . . 
 Common laborers.. 
 
 Teamsters 
 
 Printers 
 
 Machine operators. 
 
 Store Clerks 
 
 Stenographers 
 
 Domestics 
 
 Farm laborers 
 
 1910 
 
 1911 
 
 191S 
 
 65 fc 
 
 67% 
 
 70 A 
 
 40 A 
 
 40 
 
 45* 
 
 35 fc 
 
 37% 
 
 40 A 
 
 50h 
 
 551/3 
 
 60 h 
 
 mh 
 
 65 
 
 671/2 A 
 
 35 h 
 
 35 
 
 40 /i 
 
 30h 
 
 35 
 
 35 h 
 
 22 h 
 
 22 
 
 25 h 
 
 20h 
 
 20 
 
 22Vah 
 
 55 m 
 
 65 
 
 66 m 
 
 18 10 
 
 19 
 
 21 w 
 
 22 u) 
 
 24 
 
 26 to 
 
 18 w 
 
 19 
 
 20 to 
 
 55 m 
 
 60 
 
 65 m 
 
 18 
 
 18 
 
 20 m 
 
 200]/ 
 
 200 
 
 250 J/ 
 
 Per cent tncreate 
 1912 over 1910 
 
 15 
 12 
 14 
 20 
 12 
 14 
 16 
 14 
 11 
 18 
 17 
 14 
 11 
 18 
 11 
 25 
 
 h, cents per hour; to, dollars per week; m, dollars per month; y, dollars per year.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 299 
 
 ployment in the building trades that succeeded the flush 
 of prosperity.^ 
 
 We may conclude, then, with regard to the expediency 
 of the tax as a social reform measure that although ineffec- 
 tive as a total reform, the tax may be salutary in its general 
 influence. Its real value lies, however, in its fiscal charac- 
 ter. As a fiscal measure, the tax has responded adequately 
 to the needs of the communities, since it is not only a pro- 
 ductive source of revenue, but also since it is least burden- 
 some to industry and capital. 
 
 13. The fact that the adoption of the tax in the west- 
 ern provinces has spread and that, even in the recent dire 
 fiscal stress ^ no attempt to rescind the measure has any- 
 where been made, is further testimony of its expediency.' 
 The question arises, however, will its adoption be confined 
 to those provinces merely? Hitherto, or rather until sev- 
 eral years ago, the older, eastern provinces stood solidly 
 against the principle of the tax.* Before the depression, 
 however, there were signs that the popularity of the new 
 
 * In the spring of 1913, usually the busy season for the building trades, 
 about half the union workmen were said to be out of emplojinent in 
 Vancouver. Cf. The British Columbia Federalionist, March 21, 1913. 
 
 ' The popularity of the tax and the faith in its expediency are shown by 
 the following incident. During the "hard times" in Vancouver recently, 
 an alderman mustered up sufficient courage, the narrator says, to suggest 
 a tax on twenty-five per cent of the value of improvements. But his sug- 
 gestion did not meet with approval in the council. Canadian Municipal 
 Journal, May, 1914, p. 172. 
 
 ' That numerous complaints should arise against the exemption of 
 improvements, especially in a time of falling values, is to be expected. 
 The significant fact that cannot be overlooked is that no action has been 
 taken to change the system, where legislation is so simple. Of all the 
 cities, Vancouver has perhaps sufiFered most from the depression, and it is 
 there that discontent with a tax which falls so heavily on the landowner 
 should be most widespread. Yet in this city Mr. Taylor, a pronounced 
 adherent of the system, has been reelected mayor time after time, and 
 again in 1915, in spite of the successful effort to unseat him. (Cf. 
 Canadian Municipal Journal, April, 1915, p. 132.) The fact that his op- 
 posing candidate, Hepburn, also favored the system of taxation shows 
 all the more the general popularity of the land tax. 
 
 * Cf. Canadian Municipal Journal, October, 1912, p. 388.
 
 800 THE TAXATION OF LAND VALUE 
 
 taxing system was growing even in the older communities. 
 Nevertheless, though public sentiment may be strongly 
 in favor of exempting improvements in part at least, great 
 opposition must be expected from the more conservative 
 provincial legislatures. Thus in Ontario, 250 municipali- 
 ties have abeady petitioned the legislature in vain to be 
 authorized to reduce the tax on improvements as compared 
 with that on land.^ The organizations that petitioned for 
 the change in Ontario were: The Canadian Manufactur- 
 ers' Association, the Toronto Board of Trade, the Corpora- 
 tion of the City of Toronto, the Toronto District Trades 
 and Labor Council, the Dominion Grange of Canada. ^ In 
 Toronto, too, popular judgment favors the change. Thus, 
 by a vote of twenty-three to one the city council submitted 
 the following proposition to a referendum vote: "Are you 
 in favor of applying for legislation to assess buildings, busi- 
 ness tax and incomes on a lower basis than land?" The 
 popular vote stood about four to one in favor of the pro- 
 posal.^ It is significant also in this connection that the 
 Union of New Brunswick Municipalities adopted a resolu- 
 tion in 1911 favoring the land-value tax as the only source 
 of local revenue.* New Brunswick, situated on the eastern 
 coast of Canada, lacks the conditions which give rise to 
 great land- value increments such as appear in the western 
 provinces. For example, the increase in population during 
 the decade, 1901-11, was in New Brunswick only 6.3 per 
 
 ^ Canadian Municipal Journal, October, 1911, p. 407. "In the last 
 couple of years attempts have been made to permit any municipality to 
 reduce the tax rate on improvements if the property owners wished it, 
 and petitions asking for this have been presented to the Legislature . . . 
 signed by over 250 municipalities, 200 newspapers and 300 labor organi- 
 zations; they have been endorsed by most of the agricultural papers and 
 by over 100 business firms in Toronto." A. B. Farmer, Tax Reform, 
 a speech delivered before the Union of Canadian Municipalities. 
 
 ' Taken from a circular issued by the Tax Reform League of Eastern 
 Canada (Toronto). 
 
 ' Dixon, op cit., p. 4. 
 
 * Canadian Municipal Journal, February, 1912, p. 50, and December, 
 1911, p. 478.
 
 MUNICIPAL TAXATION IN WESTERN CANADA 301 
 
 cent, as compared with 119.6 per cent in British Columbia, 
 413 per cent in Alberta, 439.4 per cent in Saskatchewan, 
 and 78.5 per cent in Manitoba.^ Furthermore, as was 
 pointed out by Professor Kierstadt, while land in Van- 
 couver was worth two and one-third times the improve- 
 ments, the improvements in Fredericton, N.B., were val- 
 ued at one and one-half times the land.^ The fact, there- 
 fore, that the New Brunswick municipalities favor the 
 exemption of improvements from taxation is especially 
 noteworthy. In Nova Scotia, a bill making the partial 
 exemption of improvements and personalty optional with 
 the local body passed the Lower House several times but 
 was rejected in the Legislative Council.' 
 
 6000 Facts about Canada (1913 edition), p. 8. 
 ' Canadian Municipal Journal, December, 1912, p. 490. 
 Bill 129 (1914), "The Optional Assessment Act." CJ. Haig, op.ciL, 
 p. 13.
 
 CHAPTER Vn 
 
 THE TAX IN ITS FISCAL ASPECT 
 
 1. After the examination in the preceding chapters 
 of the systems of land-value taxation in operation, we 
 must proceed by synthesis to discover the common essence 
 of the various forms of the land tax, to find its relation 
 to the other taxes, and to set forth its underlying prin- 
 ciples from a fiscal standpoint. To reduce the protean land 
 taxes to a homogeneous form to the land- value tax 
 is not simple. Indeed, the possibility of classing the value- 
 increment duty with the tax on the capital value of land, 
 or the mineral-rights duty with either of the former, may 
 well be doubted. In one case the base of the levy is the 
 value increment, in another the capital value, in a third 
 the rental value; in one case the tax is direct and in another 
 indirect; sometimes it is proportional and sometimes pro- 
 gressive; in certain cases it has occurred as a general and 
 in other cases as a special, or ancillary charge. Neverthe- 
 less, it may be maintained that certain essential characteris- 
 tics appear in the land-value tax under all the divergences 
 of form. The basis of taxation in all these systems is land; 
 the essential or common purpose is to tax the realized or 
 realizable income accruing from the ownership of such 
 land, and to exempt income derived from the employment 
 of capital and labor expended for improvements. Discrep- 
 ancy makes its appearance in the methods and means of 
 assessing the income and of levying the tax. 
 
 If we inquire what has determined the choice of method, 
 and which of the various systems is the most to be desired, 
 it will be found, first, that the proponents of the taxes on 
 land value in the several countries have followed the line 
 of least resistance; secondly, that, inasmuch as social as
 
 THE TAX IN ITS FISCAL ASPECT 808 
 
 well as fiscal considerations are often the determining fac- 
 tors in the introduction of the tax, fiscal expediency alone 
 cannot determine what form will be most expedient. We 
 shall find, for instance, that in the British colonies the tax- 
 ation of the unimproved value of the land on the basis of 
 its capital value is not only most expedient economically, 
 but is most consistent with the democracy of those colonies; 
 that in Germany the value-increment tax founded on the 
 system of taxing " Konjunktur " gains ^ conforms best with 
 the prevailing system of taxing income ^ rather than prop- 
 erty; that in England, where the taxation of capital value 
 has hitherto been unpopular, if not obnoxious, a plurality 
 of duties an almost fantastic adaptation of a transplanted 
 system of taxation was deemed necessary to effect the 
 purpose in view. 
 
 Again we find that where the purpose was fiscal rather 
 than social or economic, the proportional direct levy oi 
 unimproved value was found most productive and most 
 expedient; that where the purpose was social, where, for 
 example, the disintegration of large estates, and the dis- 
 couragement of speculation and absenteeism were sought, 
 the progressive scale of rates, or the especially discrimina- 
 tory undeveloped land tax, was most effective; that where 
 the ethical, or economic motive, the question of the "un- 
 earned increment" was uppermost, the indirect mode of^ 
 levy, i.e., on occasions when the increment would accru^ 
 was adopted; and that where a particular system of h 
 tenure, such as the leasing system, had taken deep root, as 
 in England, a new form of levy had to be devised, namely, 
 the reversion duty. 
 
 ^ See supra, chapter iv, 3. 
 
 * That the German system is to tax the increment which has actually 
 accrued at the time it is appropriated is seen from the fact that the 
 occasion of the levy of duty is on transfer of property by sale. This is in 
 contrast with the English system which levies a duty on a hypothetical 
 or anticipated increment, as, in the reversion duty, undeveloped-land 
 duty, and value-increment duty in case of death, or lease, etc.
 
 d04 THE TAXATION OF LAND VALUE 
 
 Assuming that in spite of the differences in form and 
 purpose, these various imposts are essentially the same in 
 principle, it is necessary to consider the tax on land value 
 in the light of fiscal theory and of modern thought gener- 
 ally. 
 
 2. As to the place of the land tax in the general cate- 
 gories of taxation, it is evident that the tax on land value 
 belongs to the genus property tax, and to the species real 
 property tax. As already set forth, ^ the direct, proportional 
 tax on land value is merely a modified form of the realty 
 tax. This was made clearly evident in the discussion of the 
 Canadian system. As for the value-increment tax, al- 
 though the method of assessment and collection varies 
 from the usual methods of taxing real property, it is never- 
 theless like the realty tax in that the basis of taxation, the 
 income accruing from landed property, is the same in 
 both cases. But just as the real property tax is differenti- 
 ated from the general property tax by the elimination of 
 personalty from taxation, so the tax on land value is differ- 
 entiated similarly from the real property tax by the exemp- 
 tion of improvements from taxation. 
 
 A second criterion of classification of taxes concerns their 
 relative importance in the fiscal system whether they are 
 principal, subsidiary, or single sources of revenue. If by a 
 "single source" is meant one covering at once all federal, 
 state, and local needs, it is to be remarked that there is no 
 single tax in existence anywhere; and according to fiscal 
 authorities a single tax, whether the base be general income, 
 land value, or something else, is for a variety of reasons 
 fiscally undesirable.^ For municipal purposes the land tax 
 in certain Canadian and Australasian communities consti- 
 tutes the chief source of public income, although not the 
 sole source, since as we have seen, licenses and subsidies 
 
 ^ See chapter i, 7. 
 
 ' Cf. Seligman, Essays in Taxation (1913), chapter iii; Bastable, 
 Public Finance (1903), pp. 343/; Cossa, Taxation (1889), pp. 128/.
 
 THE TAX IN ITS FISCAL ASPECT 305 
 
 from the provincial government supplement the local 
 revenue. As for the value-increment, undeveloped land, 
 reversion, and mineral-rights duties, the intention has 
 always been to make these merely subsidiary sources of 
 revenue. In fact, the nature of these forms of the tax pre- 
 vent them from becoming the prevailing taxes, since their 
 yield is uncertain and inelastic. Thus, the revenue from the 
 undeveloped land duty, unless the purpose of the tax is 
 frustrated, should diminish in amount as the land becomes 
 better utilized. It would seem that only the direct pro- 
 portional tax is adapted to a general levy, that is for general 
 purposes, while the revenue accruing from the other forms 
 of the land-value tax has been sometimes devoted to a 
 special fund, as, for example, for municipal improvements ^ 
 or old-age pensions. With the exception of one form of the 
 tax, then, the direct proportional, the tax on land value 
 constitutes a subsidiary impost. Indeed, wherever levied, 
 the accruing revenue constitutes a trifling proportion of 
 the total public income. 
 
 3. Taxes may further be classified according to the 
 civic division, local, state, or national, by which and for 
 whose use they are raised. Great emphasis is laid by au- 
 thorities on public finance upon the problem of separating 
 the sources of revenue according to their suitabiHty for 
 local, state, or federal purposes.^ It is, therefore, necessary 
 to show to what extent, if at all, the tax on land value con- 
 forms to the most authoritative scheme of separation. 
 The tax on land value is in essence a tax on real property. 
 Now, whatever difference of opinion there may exist with 
 regard to the classification of the other taxes, there seems 
 to be a consensus of opinion, in this at least, that the real 
 property tax should be relegated to the local governments.' 
 
 1 As in Frankfurt a. M., for example. Cf. supra, chapter iv, 20. 
 
 * Cf. Seligman, Essays in Taxation (1913), chapters xi and xii. 
 
 * This position is taken primarily because it accords with the wide- 
 spread practice in this country of supplying nearly all the municipal 
 budgets by means of the realty tax.
 
 306 THE TAXATION OF LAND VALUE 
 
 The arguments upon which the defense of this position 
 is based are the following: First, from the standpoint of 
 administration, the local assessors, especially if they are 
 civil service appointees, are most likely to know the actual 
 value of the property, and to have an understanding of the 
 peculiar local conditions influencing values. Secondly, 
 there is the "situs" argument, that the property should be 
 taxed where it is located, so that the community in which 
 the value of the land has been created may be benefited by 
 appropriating a part of that value. It accords, therefore, 
 with the principle that land value is a socially created, or 
 community value. Again, it also accords with the "bene- 
 fit" theory of taxation, that the individual ought to con- 
 tribute to the state in proportion to the services received 
 by him. Thirdly, the local assessment of realty conforms 
 with the principle of local autonomy. The levy of a prop- 
 erty tax by the state, for example, often results in the sup- 
 port of the poorer sections by the more wealthy sections of 
 the state. But under local autonomy, i.e., where each com- 
 munity provides its own budget from its own resources, 
 the rural districts and the urban districts will be self-de- 
 pendent. This, then, meets the objection, for example, that 
 by the exemption of improvements, the urban communi- 
 ties will be relieved from some of the burden of taxation at 
 the expense of the rural districts where the value of the 
 land compared with the value of the improvements is pro- 
 portionally greater than in cities.^ Fourthly, it is also 
 argued that no other tax is more appropriate or more avail- 
 able for local purposes than the real property tax. The 
 income, inheritance, railway, corporation and excise taxes 
 are held to be more suited for the other taxing jurisdictions. 
 Moreover, to tax business or any form of capital in one 
 locality and not in the others, is very likely to drive out 
 the business or capital taxed, to the detriment of the in- 
 dustrial progress of the community. These reasons, there- 
 
 * Cf. Seligman, Essays in Taxalion (1913), p. 85; and infra., pp. 344 jf.
 
 THE TAX IN ITS FISCAL ASPECT 307 
 
 fore, favor the relegation of the tax on real property to the 
 local governments. 
 
 In actual practice the tax on land value, in spite of its 
 kinship to the realty tax, has been levied now by the muni- 
 cipality, now by the state, and again, by the federal au- 
 thority. As we have seen, however, the proportional, 
 direct, general land-value tax, such as is levied in the Cana- 
 dian municipalities, has down to the present been confined 
 to municipal purposes, while the progressive, indirect, and 
 subsidiary forms of the land- value tax are state and federal 
 taxes.^ Thus, it would seem, the purpose of the respective 
 forms of the tax determines by what civic division it should 
 be levied. Where fiscal considerations predominate, as in 
 the case of the Canadian and Australasian municipal levies, 
 land-value taxes are as yet strictly municipal taxes; where 
 the purpose of the levy is primarily not revenue, but social- 
 economic reform, the tax is levied by authorities of wider 
 jurisdiction. It is significant in this connection, and in view 
 of the apprehensions of some economists with regard to the 
 results of separating the sources of public revenue,^ that in 
 both the Canadian and Australasian municipalities, where 
 the tax is in operation, not only is the principle of separa- 
 tion in force, but autonomy, or rather local option, in taxa- 
 tion exists in a great measure.' 
 
 . If it were necessary to justify the levy of the discrimina- 
 tory land tax by the state or imperial governments, in 
 accordance with the fiscal principle discussed above, it 
 might be contended that the cause of the value increment 
 of land is not wholly local, but that the expenditures of the 
 
 * The German " Wertzuwachssteuer" is an imperial tax in form only, 
 the revenue accruing to the local bodies. 
 
 * For example. Professor Bullock, who is opposed to the principle of 
 separating the sources of revenue partly because it will lead to local option 
 in taxation. Cf. Seligman, Essays in Taxation (1913), p. 367. 
 
 * Nevertheless, the provincial government in Canada and the state gov- 
 ernment in Australasia control the local authorities in their tax legisla- 
 tion, while in Queensland the local tax on unimproved value is even 
 compulsory, not optional.
 
 808 THE TAXATION OF LAND VALUE 
 
 larger and higher civic divisions affect the value of the land 
 as well. In the case of mines and other natural resources, 
 whose value depends and is generally attributable to a 
 more extended market than the immediate locality, the 
 imperial and state duties can indeed be defended theoreti- 
 cally from this standpoint. Or, it may be argued that the 
 fluctuating and indefinite yield of these indirect taxes, 
 which, if levied by the local authority, would be very 
 slight, becomes considerable when the base is broadened 
 by making them state or federal imposts.^ 
 
 4. The distinguishing features of the land- value tax, 
 and those which render its levy so popular with certain 
 groups of people are its underlying fisco-economic prin- 
 ciples of incidence, amortization, and the taxation of capi- 
 tal versus rental value. 
 
 From the time the Ricardian rent theory ^ was pro- 
 mulgated to the present day, economists have been in 
 general agreement as to the theory of the incidence of a 
 tax on rent. Accepting the Ricardian theory of rent as a 
 surplus value, economic theory holds that a tax on rent or 
 on the differential value of land cannot be shifted. A sharp 
 distinction is drawn in this theory between land and other 
 commodities; land is non-reproducible; its supply is fixed 
 irrespective of the demand. Further analysis of distinc- 
 tions between land and other objects of value led econo- 
 mists to hold that the essential differentiating character- 
 istics of land consist only in its qualities of extension and 
 situation. The principle that a tax on rental cannot be 
 shifted is held to be applicable only in so far as rent is due 
 
 * Cf. Seligman, op. cit., p. 354. 
 
 ' The credit of discovery of this principle belongs to a number of 
 writers who anticipated Ricardo. They were James Anderson {An In- 
 quiry into the Nature of the Com Laws, with a view to the new Com Bill 
 proposed for Scotland, 1777), Sir Edward West (An Essay on the Applica- 
 tion of Capital to Land, etc., 1815), Thomas R. Malthus {An Inquiry into 
 the Nature and Progress of Rent, and the Principles by which it is regulated, 
 1815), and Robert Torrens {An Essay on the External Com Trade, etc., 
 1815).
 
 THE TAX IN ITS FISCAL ASPECT 309 
 
 to the "location" or "diflFerential site" value.^ It is as- 
 sumed by this theory that the landlord always exacts the 
 highest possible rental from his tenant, a "rack" rent. 
 Hence an additional burden, as a tax on rent, cannot be 
 shifted to the occupier or lessee, but must be borne by the 
 landlord himself. 
 
 Now, where conditions are as thus assumed,'^ this prin- 
 ciple of incidence logically follows. But whether the tax 
 on rent as ordinarily charged can be shifted or not has not 
 yet been experimentally demonstrated. Indeed, Professor 
 Nicholson ' and others seem to have refuted the doctrine 
 with respect to agricultural land in England by demon- 
 strating that rating on agricultural land values having 
 declined so considerably during the last quarter of a cen- 
 tury is a tax on profits, and is borne by the tenant in 
 part, as well as by the landlord. Does it mean, therefore, in 
 so far as the tenant bears the tax, that the much maligned 
 English landlord had not exacted the highest rack rent 
 from the occupier after all? It is also to be noted that 
 practical students do not accept the principle of rent un- 
 questioningly. Thus, for example, in the conference pro- 
 ceedings of the " Verein fiir Sozialpolitik " the question of 
 the incidence of the "Zuwachssteuer" was admitted to be 
 
 ^ According to Professor Davenport, unless the fertility differentials be 
 separated from the location differentials, and unless the tax fall only on the 
 latter, it will be shifted to the tenant who will in turn recoup himself by 
 "skimming the soil" or exhausting the fertility. See his Value and Dis- 
 tribution, p. 249, note. 
 
 * Like many other assumptions of the cla^ical economists, those under 
 which the rent theory was worked out are preposterously inconsistent 
 with the facts. Free competitive conditions do not exist; in the variety 
 of the uses of land, the differential value cannot be computed except 
 theoretically and diagrammatically; and, moreover, numerous other 
 factors enter into the determination of rent besides the economic. 
 
 * Cf. Rates and Taxes as Affecting Agriculture, pp. 124 jf., 146. His ex- 
 planation is, of course, that there exists little agricultural land subject 
 to economic rent; that the rent paid is to a great extent profit on capital 
 sunk in the land by the owner. This does not contradict the Ricardian 
 theory, but illustrates how the theory is inapplicable to existing condi- 
 tions.
 
 810 THE TAXATION OF LAND VALUE 
 
 unsolved.^ To take another example, in the debates in the 
 British Pariiament on the mineral-rights duty the attitude 
 of practical men with regard to the classical theory of 
 incidence was very skeptical. Even among the supporters 
 of the land duties, especially among the mining operators 
 (not owners), the proposal to impose a tax on mineral 
 rights, on the royalty, caused much apprehension that the 
 price of minerals might be enhanced.^ The evidence from 
 the countries we have studied, furthermore, is equally 
 inconclusive as regards the incidence of the tax. With 
 respect to urban land, however, general observation seems 
 to confirm the classical principle of incidence,^ probably 
 because of the great demand and the active competition 
 for particular sites and because of the impersonal relation- 
 ship that exists for the most part in cities between land- 
 lord and tenant. 
 
 In the generally accepted theory of the incidence of 
 taxation on buildings and other improvements, is to be 
 found the ground for advocating the exemption of improve- 
 ments from taxation. Buildings and improvements are 
 capital, reproducible and subject to decay. The value of 
 reproducible commodities is held to approximate their cost 
 of production. In the long run, therefore, a tax on build- 
 ings will tend to be shifted to the occupier.* The conse- 
 quences of this theory will be further discussed in the fol- 
 lowing chapter. Here, it may be questioned whether the 
 incidence of the tax on land and building respectively can 
 be so nicely determined as the above statement of the 
 theory suggests, or whether the two do not constitute a unit 
 subject to a new law of incidence. The process of shifting 
 
 * Cf. VerhancUungen des Vereinsfiir Sozialpolitik, Schnften des Vereins 
 (1911), vol. cxxxviii, pp. 45-46, and elsewhere. 
 
 Pari. Debates (1909), vol. ix, p. 415; vol. xi, pp. 1147 Jf. 
 
 Cf. Verhandlungen des Vereinsfiir Sozialpolitik (1911) p. 46. 
 
 * Two conditions limit the application of this principle, namely, when 
 the tax is imposed uniformly on all kinds of capital, and in the case of old 
 buildings, when the owner may have to bear the tax.
 
 THE TAX IN ITS FISCAL ASPECT Sll 
 
 an additional tax on buildings, for example, assumes a 
 readjustment in the demand and supply of houses. That is, 
 fewer new dwellings would be built until the rentals ad- 
 vanced sufficiently to cover the tax burden. The remission 
 of the tax would similarly cause a readjustment in the 
 demand and supply resulting in reduced rentals. Other 
 factors enter, however, to complicate the problem of in- 
 cidence, because the tax on land value may raise the tax on 
 land, synchronously with the remission of the tax on build- 
 ings. To elucidate some of the frictional factors arising 
 from this twofold change in taxation, its probable effects on 
 building operations must be discussed. 
 
 5. The recent developments in the economic theory 
 revolving about the effects of the taxation of land value, 
 called forth by the Single Tax agitation, are notable. It 
 used to be consistent with sound theory to believe on the 
 one hand that the remission of the tax from buildings, as 
 from any reproducible good, would act as an incentive to 
 their production; on the other, that the expectation of 
 rising land value and of landownership was responsible for 
 the development of new countries and new communities. 
 Now, once we recognize that building too is inevitably 
 bound up with land-value increments and landownership, 
 and that, as Professor A. S. Johnson believes,^ the latter 
 are incentives to building operations, the antagonistic 
 tendencies arising from the untaxing of buildings and from 
 the appropriation of the value increment become apparent. 
 
 Before attempting to determine which tendency will be 
 the stronger, it is necessary to point out the refutation on 
 theoretical grounds of the doctrine that the owner is in- 
 duced to build by the prospect of the future rise in land 
 value. Dr. Anderson ^ has shown by a mathematical illus- 
 
 ^ Cf. " The Case Against the Single Tax," in Atlaniic Monthly, January, 
 1914, p. 36. 
 
 * Anderson, " ' Unearned Increments,' Land Taxes, and the Building 
 Trade," in Quarterly Journal of Economica, vol. xxvni, pp. 811 ff.
 
 812 THE TAXATION OF LAND VALUE 
 
 tration, on the principle that earnings in all lines of indus- 
 try tend to become equalized, that the increment is an 
 irrelevant factor in the determination to build. Whether 
 his exposition accords with the facts or not, it would 
 seem that in general the speculative character of the "un- 
 earned increment" would scarcely be conducive to build- 
 ing that was not capable of a return on the whole ground 
 rent and interest on the investment. A distinction must be 
 made between the ordinary investor in real estate and the 
 speculator. The investor in urban property expects an an- 
 nual income on his investments. The anticipated incre- 
 ment may make a smaller annual return satisfactory to the 
 investor. This may also account for the fact that the de- 
 terioration of the building is often not amortised, and for 
 the fact that the mortgagee often counts on the incre- 
 ment in making the loan. ^ But it seems clear that the in- 
 fluence of the future value increment can affect the rate 
 of income only in communities where land values are based 
 on actual rentals and where the rate of increment is con- 
 stant and reflected from time to time in the higher rents. 
 The investor in farm land, on the other hand, is the 
 farmer himself, who is willing to forego an immediate re- 
 turn from his improvements, because of the prospective 
 value increments. 2 
 
 It is otherwise with the speculator, including the " land- 
 poor" owner as well as the capitalist operator. Now in case 
 of land not yet ripe for building, where the increment is 
 more or less remote and speculative, an owner unable to 
 pay the carrying charges on the land, i.e., taxes and special 
 
 ^ In the instance cited by Dr. Haig to show that realty operations also 
 are financed on the expectation of the increment, it will be noted that it is 
 a steady annual increment founded on the increase of the earning power 
 of the land in New York City. Cf. " The Effects of Increment Taxes upon 
 Building Operations," in Quarterly Journal of Economics, vol. xxix, 
 p. 831. 
 
 * It is interesting to point out in this connection that the money invest- 
 ment in the land by the pioneer, or the promoter of a new town is almost 
 nil; hence his readiness to wait a long time for the inevitable increments.
 
 THE TAX IN ITS FISCAL ASPECT SIS 
 
 assessments, might be tempted to build even when the ren- 
 tal did not promise a greater return than the interest on 
 his borrowed capital,^ and the carrying charges on the land. 
 But such operations would be confined necessarily to 
 outlying districts and new communities, and even there 
 their scope would be limited. For the borrowing power 
 of the "land-poor" builder, where the rise in value is re- 
 mote is very much limited, and the rate of interest higher. 
 The best proof, on the other hand, that the speculator 
 with means is not induced to build prematurely is the 
 large number of vacant lots in every city, and the large 
 expanse of uncultivated rural land in the hands of ab- 
 sentee owners. And are they not deterred from building 
 prematurely by the fact also that the low income would 
 be a convincing proof to them, and to their creditors, of the 
 true low value of their property? The importance of this 
 psychological factor is seen in the usual practice of land- 
 lords to allow their apartments to stand vacant, or to offer 
 "concessions" to the renter, rather than to accept a lower 
 rental. It is scarcely credible that, taking any city as a 
 whole, building operations could be based on the whims of 
 speculators, rather than on actual values. Altogether then, 
 whether he builds on leased ground, on ground which is not 
 rising in value, or on ground which does promise an incre- 
 ment, the landlord "must extort from his tenants rental 
 covering both the ground rent and interest on the invest- 
 ment." 2 
 
 Now, grant that the development of a new coimtry 
 and that premature building, e.g., the "pay tax" kind 
 of structures in Western Canada,' are attributable to the 
 
 ^ Disregarding the depreciation of the building to be covered by the 
 anticipated " unearned increment." 
 
 * That there could be a difference in rentals according as the builder is 
 the owner or lessee, if it does not invalidate the argument, at least shows 
 that the number of operations that do not cover interest on the land in- 
 vestment can be but exceptional. Cf. Johnson, (yp. cit. 
 
 * Haig, Exemption of Improvements from Taxation in Canada and the 
 United States, p. 47.
 
 814 THE TAXATION OF LAND VALUE 
 
 anticipated increment. They are not, however, the basis of 
 our present agricultural progress or urban development, 
 any more than speculation in stocks and produce, which 
 assist general production and distribution, is the cause of 
 the progress of the latter. The more than two million 
 tenant farmers in this country, an ever-increasing class, 
 not to mention the farm laborers, contradict the alleged 
 eflBcacy of the "unearned increment" to preserve our agri- 
 cultural population and progress.^ So does the widespread 
 leasing system in England discredit the potency of the 
 "unearned increment" as the incentive to building opera- 
 tions. If, then, the cases where premature building is in- 
 duced by rising land value are limited to the "land-poor" 
 owners, the effect of the tax on land value on them, it has 
 been pointed out,^ will be a twofold one. First, as an in- 
 crease in the annual burden on the land, the tax will have 
 the tendency to induce early building; secondly, as an 
 appropriation of more of the prospective increments, it 
 will discourage building. 
 
 Now, turning to the influence of the untaxing of im- 
 provements on the building trade, the effect, it is generally 
 held, would be to stimulate building. But in so far as 
 this tendency would result merely from the exemption of 
 one form of capital now disproportionately burdened by 
 taxation, the stimulation would cease with the equaliza- 
 tion of the rates of profit in competitive industries. 
 Should, however, the demand for new buildings increase 
 through other causes,^ the building trade will continue 
 active. 
 
 After these theoretical considerations, we may inquire 
 whether the study of the tax does not elucidate the prob- 
 lem. Briefly, if it has been difficult or impossible to trace 
 the great building activity in the Australasian and Cana- 
 
 ^ Cf. Johnson, oj). cit., p. 34. 
 
 * Haig, in Quarterly Journal oj Economics, vol. xxix, p. 838. 
 
 Cf. supra, 4, p. 311.
 
 THE TAX IN ITS FISCAL ASPECT S15 
 
 dian municipalities to the operation of the land tax, it can 
 be said with confidence nevertheless, that no evidence of a 
 restriction of building operations appeared anywhere. Nor 
 could the inactivity in the building trade which followed 
 the enactment of the land-value duties in England, and of 
 the imperial increment tax in Germany, be charged to the 
 tax on the "unearned increment." ^ 
 
 6. The principle of "amortization" rests on the as- 
 sumption that the land tax is not shifted. The argument 
 runs as follows : Since the value of the land represents the 
 capitalized annual net rental actually accruing or antici- 
 pated, and since the tax on this rental cannot be shifted to 
 the tenant, the value of the land when the tax is imposed is 
 reduced by the capitalized value of the tax. Therefore, the 
 proprietor in possession, when the tax is levied, alone pays 
 the tax, as is evident from the reduction in the selling value 
 of his property. When the tax is thus capitalized, or 
 "amortized," the purchaser of the land subsequent to the 
 imposition of the tax is in reality exempt from its payment. 
 
 The process of "amortization " applies to the land tax in 
 so far as the latter is an exclusive tax, i.e., not levied on 
 other forms of capital, or income. The facility of capi- 
 talizing the tax depends upon the certainty of the levy, 
 that is, the constancy of the rate of tax and of the assessed 
 value. Provided the amount of the tax can be coimted 
 upon, the purchaser will deduct its capitalized value, for he 
 will not pay more for the property than the capitalized 
 value of the anticipated net rental. The fact that land falls 
 in value on the imposition of a tax, therefore, corroborates 
 the principle of incidence of a tax on land value. Theoreti- 
 cally the value of the improvements will not fall, for their 
 value equals the cost of their production and it would seem 
 as if their value could not fall below their cost. In other 
 words, the tax on improvements is shifted to the tenant. 
 Practically, however, especially when the structures are 
 * Cf. chapters iv and v.
 
 316 THE TAXATION OF LAND VALUE 
 
 old, the tax may affect their value. At any rate it is dif- 
 ficult to measure or trace the exact decline in the value of 
 improvements in case of an imposition of a new tax on real 
 estate. 
 
 In our American cities, with the general property tax, 
 under which most forms of wealth except real property 
 practically escape taxation, the "amortization" process is 
 not only theoretically possible, but is the estabUshed pro- 
 cedure. In purchasing property every one takes into ac- 
 count the amount of taxes, deducting their capitalized 
 value from the value of the capitalized rental of the prop- 
 erty. Theoretically, then, the tax is no burden on the land 
 owner who has purchased subsequent to the imposition of 
 the tax. In this country, indeed, where the rate of tax is 
 more or less constant the land tax essentially ceases to be 
 a tax at all. The ease and certainty of this kind of taxa- 
 tion accords well, indeed, with American individualism, 
 respect for private property, and general distaste for pay- 
 ing taxes. The "amortization" process may well be an ex- 
 planation not only of the absence of full-value and uniform 
 assessment, and of the general undervaluation of real estate, 
 but also of the popularity of the real property tax in this 
 country, as compared with other taxes. ^ 
 
 Whatever makes the ascertainment and computation of 
 the untaxed value of the land difficult, checks or frustrates 
 this process of "amortization." Not that the expectation 
 of a tax will not always affect the value of the property, 
 but by keeping the assessment at the actual value by fre- 
 quent valuations, by graduating the scale of rates, by tax- 
 ing the value increment, the landowner will at least be 
 made to share the income from his value increment with 
 the government to a greater degree than at present. Take, 
 
 * This is illustrated by the diflBculties encountered with legislatures in 
 revising the statutes to j)ermit of a full-value assessment, in spite of the 
 advantages it may have industrially in lowering the rate of tax, and 
 broadening the basis for public loan purposes. A readjustment of values 
 gives rise to apprehension among landlords. See infra, chapter x.
 
 THE TAX IN ITS FISCAL ASPECT 817 
 
 for example, the progressive urban communities where land 
 tends to appreciate in value, as in western Canada, and 
 where the untaxed value of the land one year may not rep- 
 resent the net value the following year. Again, by intro- 
 ducing a progressive scale of rates, how shall the purchaser 
 estimate the capitalized value of the tax with any degree of 
 accuracy? Even more does the tax on value increment de- 
 feat the process of "amortization" of the tax; for as the 
 owner is taxed, not on the selling value, but on the profit or 
 surplus likely to accrue in the future, the untaxed value of 
 the land cannot be foretold. The amount by which such a 
 tax may reduce the value of land becomes entirely specu- 
 lative. Indeed, as the interest of both speculator and tax- 
 ing authority is the same, namely, that the land appreciate 
 in value, the value-increment tax may not have a severely 
 depreciating influence on the value of the land at all. At 
 any rate, the objection by some that the real property tax 
 is no tax whatever because it is "amortized," does not 
 apply so much to the tax on land value, especially to the 
 value-increment form of the tax. 
 
 7. The question whether the capital value, i.e., the 
 capitalized net income, or whether the net income of the 
 land (not deducting taxes) should be made the base of tax- 
 ation is unimportant as regards the slight tax on land value 
 at present in operation. Inasmuch, however, as critics of 
 the Single Tax have pointed out the futility of attempting 
 to raise revenue by a tax on the capital value of land and 
 have employed the argument also against the proposal of 
 land-value taxation,^ it is necessary to analyze the point at 
 issue. As a fiscal policy taxation on the capital value of 
 land may be regarded as a paradoxical proposal, for by 
 taxing land value you destroy the value by the amount of 
 the tax capitalized. If, as has been pointed out,^ the mar- 
 
 * For example, see E. R. A. Seligman, in The Survey, March, 7, 1914, 
 p. 701. 
 ' Mr. Pleydell, Secretary of the International Conference on State and
 
 S18 THE TAXATION OF LAND VALUE 
 
 ket value declines by reason of the tax, there will be less 
 and less to tax as the rate increases. For example, suppose 
 the annual tax on land is two and one-half per cent. The 
 market value of a parcel of ground yielding an income of 
 $50 was before the levy of the tax $1000,^ and after the im- 
 position only $666|.2 Instead of yielding a tax of $25 on 
 $1000, the tax on $666 is only $16.66f , from the stand- 
 point of revenue a loss of about $8. Indeed, if the rate 
 of tax were sufficiently increased, in accordance with the 
 Single Tax proposal, the very purpose of the tax would be 
 frustrated. Thus, were the rate fixed at five per cent, and 
 were the capital value to remain the base of the tax, there 
 would be no value to tax, the capitalized tax having ab- 
 sorbed or destroyed all the income. The significant thing, 
 however, is that all this time the rental remains undis- 
 turbed. 
 
 In view of this situation it has been proposed ^ that the 
 annual rental rather than the selling value (the untaxed 
 value) be made the basis of assessment. Or, if ad valorem 
 
 Local Taxation says: "I was rather surprised to hear the advocates of 
 Single Tax speak in the same breath of taxing the unearned increment by 
 taxing a certain amount out of the value of land at the time of sale. All 
 attempts to deal with selling values in this way are dealing with what in 
 one sense is legal fiction. The only reason land has value at all is that you 
 can get a certain rental out of it. If you keep people from collecting rents 
 you destroy values. Now, how are you going to tax the unearned incre- 
 ment which disapi>ears wherever you increase a tax on the rental value 
 is a problem I have not yet been able to understand. It is interesting to 
 see how that would work out. A man pays a certain amount of money for 
 his land based upon the estimated net return, but if he is deprived of a 
 certain amount of his net return by an increase in the annual tax, the 
 land will have its selling value reduced. The intricacies would amuse 
 one," etc. Quoted by Marsh, Taxation of Land Values in American 
 Cities, p. 49. 
 
 ^ At five per cent. 
 
 ' Because two and one-half per cent of $6663, capitalized, plus the net 
 value $666j, make up the $1000 original value. 
 
 * See Davenport, " The Single Tax in the English Budget," in Quar- 
 terly Journal of Economics (1910), vol. xxiv, pp. 283 jf. Also Pleydell, 
 "The Incidence of Taxation," in First Conference on Stale and Local 
 Taxation" (1907), p. 432.
 
 THE TAX IN ITS FISCAL ASPECT S19 
 
 taxation is preferred, that the actual or anticipated rental 
 be capitaHzed for purposes of taxation. From the stand- 
 point of the proprietor certainly the change is of no conse- 
 quence. Whether you tax the market value or the rental 
 his net income will remain practically unaltered. From the 
 point of view of fiscal poUcy, however, the change is im- 
 portant. Since, according to theory, the rent remains un- 
 affected by the tax on land value, the government can 
 always appropriate a portion of this economic rent by 
 taxation, irrespective of market conditions. 
 
 For practical purposes, however important these sug- 
 gestions may be for the Single Tax policy, the tax on land 
 value may continue to be levied on the selling value with- 
 out loss to the government. So long as confiscation is not 
 proposed, through the regulation of the rate of tax the 
 state can appropriate whatever share of land value it de- 
 crees by taxing the selling value. 
 
 More practical difficulties may be raised when the as- 
 sessment is reduced by the decHne in the value of the land. 
 For, if a law exist limiting the rate of tax in the municipal- 
 ity, or if, as is customary, the amount of municipal indebt- 
 edness is restricted legally by the amount of the assessment 
 of real property, the exemption of improvements, or any 
 other cause of restricting the base of revenue, may neces- 
 sitate a change in the statute. This is again a matter of ad- 
 ministration, necessary to point out, but which does not 
 vitiate the fiscal principle of the tax.^ Moreover, full-value 
 assessment and the tendency of appreciating land value 
 will counteract the restriction of the base of taxation. 
 
 Another consideration important alike from the stand- 
 point of the taxing authority and that of the taxpayer, is 
 
 ^ To circumvent the constitutional diflSculties with respect to the legal 
 limitation of the borrowing power of the city, the recent proposal for 
 untaxing buildings in New York City retains one per cent of the value of 
 improvements in the tax base. Thus, it is hoped, the total value of the 
 improvements would continue to constitute part of the assessment value, 
 by which the borrowing power of the city is limited.
 
 320 THE TAXATION OF LAND VALUE 
 
 raised by the value-increment duty. As the selling value 
 is the basis of computing the increment, any change in that 
 value occasioned by a change, not in income, but in the 
 interest rate will contract or swell the taxable differential. 
 Any fall in the rate of interest will, therefore, entail an 
 unintentional hardship on the taxpayer; while a rise in rate 
 will entail a loss in revenue. This diflSculty, which raises 
 a serious objection to the levy of the value-increment tax, 
 could be obviated by making the gross rental the basis of 
 computation.^ 
 
 8. This fine, even subtle, distinction in method of as- 
 sessment for administrative purposes is not to be confused 
 with the ordinarily understood difference between taxing 
 the capital value and the rental of land. Historically the 
 assessment on the basis of rents paid preceded that on the 
 basis of capital value. In fact the latter method has only 
 recently superseded, or is superseding, the assessment of 
 rental income. With few exceptions,'' the general assess- 
 ment on the basis of the capital value of property is con- 
 fined to the United States, Canada, Australasia, and 
 (since the enactment of the land-value duties) to England. 
 In Germany, the system of assessment "nach dem ge- 
 meinen Wert" has only recently begun to supersede the 
 older method. 
 
 The advantages and causes of this change in method 
 have already been reviewed.' The chief argument is that 
 the taxation of rentals encourages the withholding of land 
 from use. Land bought and kept undeveloped for specu- 
 lative purposes is exempted from the tax provided no rent 
 
 ^ Cf. Davenport, in Quarterly Journal of Economics (1910), vol. xxiv, 
 pp. 28^90. 
 
 * In some of the Swiss cantons, in Rome for building land, and in Hol- 
 land for the property tax, capital value, rather than rental, is now also 
 made the basis of assessment. Cf. Papers Bearing on Land Taxes, etc. 
 (Cd. 4750), 1909, p. 50, and (Cd. 4845). The supplementary income tax 
 in Prussia and some of the other states is levied on the capital value of 
 property, while in Great Britain the death duties are so levied. See ihid. 
 
 ^ See supra, chapters v and vi.
 
 THE TAX IN ITS FISCAL ASPECT 821 
 
 is yielded; therefore, speculation is fostered. In urban 
 communities the withholding of land from use has been 
 said to promote congestion and unsanitary housing condi- 
 tions. Furthermore, the exemption of vacant and poorly 
 utilized land from taxation is fiscally inexpedient, for it 
 becomes a means of escaping taxation. When it is con- 
 sidered also that the value of vacant land tends to appre- 
 ciate equally, sometimes even more ^ than the improved 
 lots, it will be admitted that the rent does not constitute 
 a test of the taxpayer's ability to contribute, unless sup- 
 plementary taxes are levied. For these reasons, the local 
 authorities in England are desirous of adopting the pro- 
 posed change from rental to capital value assessment.^ 
 And the purpose of the undeveloped land duty in England 
 was to correct the inequalities resulting from the older sys- 
 tem of assessment. Similarly in Canada, the wild-land tax 
 and the method of superassessment have been resorted to, 
 to offset the tendency of evading taxation by keeping the 
 land undeveloped. 
 
 A word about the status of the absentee. Not all unim- 
 proved land is owned by non-residents; yet, in many com- 
 munities much of the vacant land is the property of ab- 
 sentees. In the countries where vacant property is not 
 liable to taxation, the general antipathy to the non-resi- 
 dent is comprehensible. But where taxation on capital 
 value is in vogue, the non-resident contributes to the reve- 
 
 * For example, when a parcel of ground is sold, the building which 
 may be out of date may be an impediment to the plans of the buyer. 
 Thus, as the writer has been informed, the site on which the Masonic 
 Temple is located in Chicago would be worth a great deal more if there 
 were no building upon it. 
 
 * Cf. E. Porritt, " The Struggle over the Lloyd George Budget," in 
 Quarterly Journal of Economics (1910), vol. xxiv, p. 257. " The mansions 
 have been on the rate books at merely nominal rental values. They have 
 stayed at such ridiculous valuations because no one in the parishes con- 
 cerned cared to antagonize the local feudal aristocracy by objecting to the 
 assessments." 
 
 The new system of land valuation which is being completed in England 
 will help usher in the rating of capital value.
 
 322 THE TAXATION OF LAND VALUE 
 
 nue in proportion to the assessed value of his property. 
 He is also liable to special assessments, and special rates 
 for services by which he only remotely benefits. Nor, must 
 it be overlooked that he has no voice in the enactment of 
 measures pertaining to taxes and expenditures. The ex- 
 planation of the discriminatory legislation against the ab- 
 sentee-owner lies in local conditions. Thus, in Canada, it 
 is the enormous increments that accrue to the absentee, 
 through the efforts of the settler in building up the com- 
 munity, that breed the spirit of opposition and discrimina- 
 tion. Then, it will be remembered that the Hudson's 
 Bay Company is classed with the absentees. And lastly, 
 in many towns half or more than half the area may 
 be owned by such a company, or other absentees, pre- 
 venting the closer settlement and the growth of the com- 
 munity. 
 
 9. It is necessary next to test the tax on land value by 
 the canons of taxation laid down by fiscal authorities. 
 Those canons are justice, economy, and fiiscal adequacy. 
 To be just a tax must be equal, universal, uniform ; to be 
 economical, it must accord with the criteria of certainty 
 and convenience; to be fiscally adequate it must be pro- 
 ductive and elastic.^ There is no tax in our complex sys- 
 tem, however, which does not practically, if not theoreti- 
 cally, sin against these canons, especially those requiring 
 equality and universality.^ Whether you make your stand- 
 ard of justice fit the "benefit" or the "faculty" theory, a 
 great deal of ingenuity must be employed to prove existent 
 taxes in harmony with the criteria of justice. The fact is, 
 as one writer has well expressed it, "expediency, not logic, 
 
 * Cf. Eheberg, Finanztoissenschaft, p. 165. 
 
 ' We are aware that fiscal authorities have reconciled even the inheri- 
 tance and corporation taxes with the canons of taxation. See Seligman, 
 Essays in Taxation (1913), pp. 126 Jf., for a justification of the inheritance 
 taxes according to equity. However ingenious such proof of the consis- 
 tency of the inheritance tax with the faculty theory may be, its adoption 
 was more a matter of fiscal expediency than of adherence to doctrine.
 
 THE TAX IN ITS FISCAL ASPECT 823 
 
 governs taxation." ^ So long as the ideal, a single tax, if 
 such exist, is found impracticable, and it is necessary to 
 have a multiple system in the hope that the inequalities of 
 the respective taxes will offset one another,^ the justifica- 
 tion of a subsidiary tax on the basis of justice will be prac- 
 tically futile. 
 
 Now, the tax on land value is not only a subsidiary, but 
 it is a discriminatory tax. But there is need of subsidiary 
 taxes, and like the corporation, inheritance, business, and 
 other imposts, the tax on land value may be made to per- 
 form a valuable function, wherever it is found expedient. 
 As to its discriminatory character, all subsidiary taxes are 
 discriminatory. Like the corporation tax, for example, the 
 tax on land value is class legislation, an attempt of the 
 dominant party to place an extra burden on the land- 
 owners. The excuse of course is that this particular group 
 or class fails to contribute to the public budget in propor- 
 tion to its ability.' 
 
 In calling the tax confiscatory, the opponents of the tax 
 forget that all taxation is essentially confiscatory. A tax 
 is no voluntary contribution, it will be recalled; it is "a 
 compulsory contribution from the person to the govern- 
 ment to defray the expenses incurred in the common 
 interest of all, without reference to special benefits con- 
 
 * Firtt Naiional Conference on State and Local Taxation (1907), p. 
 219. 
 
 ' Thus Cossa said, "by means of their variety rendering the burden 
 less oppressive to the taxpayers." Premiers Eliments de la Science des 
 Finances, p. 108. 
 
 * It is possible to argue that the landlord is better able to pay this 
 extra charge because of his particular position of special privilege and 
 because the growth of the community enhances the value of his land, so 
 that his income is augmented over and above the interest on his invest- 
 ment. "Is it too much, is it unfair, is it inequitable, that Parliament 
 should demand a special contribution from these fortunate owners to- 
 wards the defense of the country and the social needs of the unfortunate in 
 the community, whose efforts have so materially contributed to the 
 opulence which they are enjoying." From Lloyd George's Budget Speech, 
 Pari. Debates (1909), vol. iv, p. 536.
 
 S24 THE TAXATION OF LAND VALUE 
 
 ferred." ^ Strictly speaking, every tax is an infringement 
 of the individual's property rights, therefore.^ But there is 
 common agreement that the rights of the individual are 
 subordinate to the will of society. Society has the power 
 and, therefore, the right to single out one social group and 
 place a special impost upon it, provided such action is 
 proved expedient.^ 
 
 10. What, then, constitutes expediency in taxation? 
 The effects of the levy of a tax are far-reaching. Professor 
 Ely's ^ words are still valid: "Taxation may create monop- 
 olies, or it may prevent them; it may diffuse wealth or con- 
 centrate it; it may promote liberty and equality of rights, 
 or it may tend to the establishment of tyranny and des- 
 potism; it may be used to bring about reforms, or "foster 
 dissension and hatred between classes. . ." The impor- 
 tance of choosing the most suitable object for taxation is 
 thus made evident. If, then, besides satisfying the eco- 
 nomic and fiscal canons, a tax is no more discriminatory and 
 confiscatory than the other existent imposts, and, further- 
 more, does not create monopoly, concentrate wealth, pro- 
 mote tyranny and social conflict, it is to be accounted 
 expedient. 
 
 Before discussing the expediency of the tax on land value 
 as judged from its operation, it is necessary to point out a 
 serious objection to its levy. The tax on land value, it is 
 claimed, is merely a pretext for the confiscation of property 
 for the purpose of promoting some social or economic re- 
 form; in reality it is no tax at all. It has been questioned 
 whether the government should exercise its taxing power 
 
 ^ Seligman, Essays in Taxation (1913), p. 432. 
 
 ' Cf. First National Conference on State and Local Taxation (1907), p. 
 214. Those who protest against the introduction of a tax on the ground 
 that one class is discriminated against overlook the gross inequalities 
 tolerated under the present system of taxation. 
 
 * To a great extent legislation, when proved expedient, has had to be 
 reconciled to the standards of right and justice, or has even modified the 
 latter. 
 
 * Taxation in American States and Ciiiea (1888), p. 65.
 
 THE TAX IN ITS FISCAL ASPECT 325 
 
 for other than fiscal purposes, i.e., to secure an adequate 
 revenue. 
 
 Since Professor Adolf Wagner promulgated his "socio- 
 political" theory of taxation, this question has aroused 
 considerable controversy. But as regards many a contested 
 theory, the opponents are nearer agreement than they will 
 admit. Professor Seligman denies Wagner's thesis that 
 taxation " is something more than a means of raising reve- 
 nue, that it is also a means of correcting the distribution of 
 wealth which results from competition." ^ Yet Professor 
 Seligman reaches the same conclusion through reconstruct- 
 ing the conception of justice.'' In setting up this socio- 
 political point of view, Wagner was merely interpreting the 
 new basis of justice, the socio-political versus the eight- 
 eenth-century competitive and individualistic basis. And 
 that is what Seligman has done in constructing the " Social 
 Theory of Finance." ' Where shall the line be drawn be- 
 tween the socio-political theory stated in Wagner's own 
 words above and the admission that the government 
 should be able "to utilize the taxing power as a political 
 or social engine?"* Nothing, indeed, shows this socio- 
 political tendency more than progressive taxation and the 
 English income tax, which distinguishes earned from un- 
 earned income. These may be explained on the assump- 
 tion that they measure better the ability of the taxpayer 
 than the proportional or ordinary income taxes. On this 
 basis, however, the tax on land value can similarly be 
 defended, for the profits accruing from land ownership can 
 bear a heavier tax with less sacrifice on the part of the 
 owner, it may be argued, than can earnings of labor. 
 Nevertheless, in this age when, it will be agreed, wealth 
 
 ' Lehr- und Handbuch der Pditischen Oekonomie : Finanzwissenschaft, 
 vol. n, bk. V, chap. 3, 159. 
 
 * Seligman, " Progressive Taxation," American Economic Association 
 Quarterly, vol. ix, pp. 130-31, and his practical admission of the stand- 
 point in Essays in Taxation, pp. 316-17. 
 
 im., p. 342. * lUd., p. 78.
 
 326 THE TAXATION OF LAND VALUE 
 
 is being accumulated because of special privilege, as shown, 
 for example, in the monopolistic control of industry, and 
 when the laboring class is assuming greater power, the 
 tendency of all legislation, including fiscal, to keep in view 
 a more equitable distribution of wealth is inevitable. 
 
 The extent to which the tax on land value has been in- 
 stituted as a reform measure, rather than as a source of 
 revenue varies with its several forms. As has been dis- 
 cussed in the preceding chapters, the municipal land 
 taxes in Canada and Australasia are purely fiscal in char- 
 acter. It will be recalled that in these cases the tax is a 
 direct, proportional levy. Theoretically, this is explainable 
 on the ground that for local purposes benefit, rather than 
 faculty,^ is the criterion of taxation; and that the degree 
 of benefit to the individuals cannot be measured accord- 
 ing to a graduated scale. Practically, it may be explained 
 by the fact that the ratepayers are the voters, that in the 
 above-mentioned communities opportunities are equal, 
 and that the progressive tax is discriminatory, and would 
 upset the stability of land values, the chief source of pros- 
 perity and income. In other words, the tax has no other 
 purpose than to make every landowner pay toward the 
 expenditures of government in proportion to the value of 
 his land. 
 
 In a way, then, the progressive and value-increment 
 taxes disclose the purpose of their levy. For the disinte- 
 gration of large estates, indeed, the graduated scale is more 
 effective than the proportional tax would be. So also, when 
 the rate of tax in Germany varies with the length of owner- 
 ship and condition of the land, the social purpose is clearly 
 manifested. The EngUsh land duties, however, are an 
 exception, for, although the predominant motive was non- 
 fiscal, the rates of tax are proportional, not progressive. 
 Either to avoid the additional complexity which the pro- 
 
 ^ Seligman, " Progressive Taxation in Theory and Practice," American 
 Economic Association Quarterly, vol. ix, p. 301.
 
 THE TAX IN ITS FISCAL ASPECT 327 
 
 gressive scale of rates must occasion, or, what is more likely, 
 to avoid the more strenuous opposition that would have 
 been aroused by a departure from the traditional adherence 
 to proportional land taxes, Lloyd George and his party con- 
 tented themselves with proportional duties on land value. ^ 
 11. There remains, then, by far the most important 
 question, the fiscal expediency of the tax on land value. 
 First, as to its productiveness. At the present rate of taxa- 
 tion, the conclusion from the data in the preceding chapters 
 must be that the tax for state or federal purposes can sup- 
 plement the sources of revenue but meagerly. Further- 
 more, the duties on increment, on undeveloped land, and 
 on mineral rights are inelastic sources of revenue. Not only 
 is the base of the tax limited, but the yield cannot be regu- 
 lated. Fiscally, therefore, the value-increment duty and 
 the other imperial duties are unimportant imposts. For 
 local purposes, on the other hand, when all land is sub- 
 ject to a direct, proportional levy, the tax is not only pro- 
 ductive but elastic. The experience with the tax in the 
 Australasian and Canadian municipalities is evidence of 
 this. Wherever the value of the land tends to increase 
 enormously, so that the rate of tax can remain moderate, 
 the yield of the tax on land value can be regulated so as to 
 supply not only the major portion, but even the entire 
 local revenue. The recent depression in Canada has not 
 necessitated a change in the system even in "Single Tax" 
 communities, but it is doubtful whether an additional 
 source of income would not have facilitated the collection 
 of revenue and relieved somewhat the landowners already 
 hard hit by the collapse of land values. This would apply 
 more strongly to older communities, where landowners 
 constitute a small proportion of the population, and where 
 landed property is not the chief source of wealth. The 
 
 * Instead of adopting the progressive scale as in Germany, the average 
 rate of the increment duty in England, however, was made higher than 
 under the German system.
 
 828 THE TAXATION OF LAND VALUE 
 
 fiscal expediency of the new system will vary with the con- 
 ditions in the different cities; but the following facts must 
 be borne in mind; that even today (l)the tax on real estate 
 suflBces for nearly the entire budget of numerous munici- 
 palities and partly also for state purposes; (2) full- value 
 assessment is practically unknown; (3) the value of im- 
 provements does not increase so rapidly as that of the 
 land. 
 
 Secondly, the convenience and certainty of the levy on 
 land value compare favorably with other imposts. No ar- 
 guments need be brought forth to substantiate this fact, 
 but it is necessary to point out a few cases of economic 
 hardship or inconvenience. In England, where taxation on 
 capital value was practically unknown, attention has been 
 called to the injustice or inconvenience of taxing the person 
 who is in receipt of no income out of which to pay, as under 
 the undeveloped-land duty.^ Likewise, we have heard 
 often of the hardship the tax would impose upon the widow, 
 owner of her own old home. So also the owner of land whose 
 value has depreciated has been commiserated. Again, it 
 may be feared that the local option, where the tax on land 
 value is in force at the option of municipaUties, may en- 
 danger industry through the rivalry which exists between 
 cities. Hardship has also been incurred by the retroactive 
 feature of the "Zuwachssteuer" in Germany. It must be 
 replied, however, that such instances of inconvenience and 
 hardship can be cited in the case of almost every tax.^ 
 Of course in communities of rapidly rising land value, the 
 land tax of a few per cent of the land value is easily dis- 
 counted and is scarcely felt. The best proof that the tax is 
 not oppressive in new countries is furnished in the adop- 
 tion of the proportional form of the impost by such demo- 
 
 Cf. Pari. Debates (1909), vol. xii, p. 516. 
 
 Not to mention the hardship of the excise and import taxes on the 
 poorest classes, the widow's case cited above is probably no worse than 
 that of the German wage-earner who out of his 900 marks annual income 
 pays a tax to the state.
 
 THE TAX IN ITS FISCAL ASPECT 829 
 
 eratic and virgin communities as in Australasia and in 
 western Canada. In these cases, the "leveling" factor, the 
 use of the tax to right a social evil, moreover, played little 
 or scarcely any part. As regards the other forms of the tax, 
 the exemption of a minimum increment under the value- 
 increment duty shields the less fortunate landowner from 
 the burden. It will be remembered also that the retroac- 
 tive feature of the "Zuwachssteuer," however inconsist- 
 ent with our standards of justice, was upheld by the 
 courts. It is improbable that the tax would have been 
 upheld, if, besides being unprecedented, it were oppressive. 
 This illustrates, indeed, how local conditions may influence 
 the criterion of justice, how expediency overrides abstract 
 principle. 
 
 Thirdly, in considering the discriminatory feature of the 
 tax on land value, the local tax must be again differentiated 
 from the imperial and state taxes. As subsidiary sources of 
 revenue the latter are no more discriminatory than the 
 corporation, inheritance, business, or even realty taxes. 
 But, when the tax on land value is made the only tax, the 
 expediency of exempting all other income from taxation 
 even for local purposes may be questioned. The fact is, 
 however, that setting against the apparent inequality 
 created by the exemption of other than the landowning 
 class from taxation the comparative difficulty of assess- 
 ment and collection of other imposts, and considering, too, 
 that the value of the land depends so much upon the public 
 expenditure, the apparent injustice dwindles. Especially 
 is this true where the land constitutes the chief source of 
 wealth and income, as in the new communities where the 
 land tax is now in operation as the only source of public 
 revenue, and where the municipality itself, given the op- 
 tion, wills to exempt wage-earners and the capital invested 
 in industry from taxation. In that case only the non-resi- 
 dent landowner is discriminated against, and has cause to 
 complain.
 
 SSO THE TAXATION OF LAND VALUE 
 
 Fourthly, it is evident both from the discussion of the un- 
 derlying principles and from the operation of the tax, that 
 it does not create a monopoly, nor concentrate wealth, nor 
 promote tyranny, nor foster social conflict. The fact is that 
 by this tax the community shares a little more of the value 
 increment which accrues to the landowner than before. 
 
 12. Aside from the above considerations, there is an- 
 other criterion of expediency by which the tax must be 
 tested, namely, the facility of its administration. In gen- 
 eral, the prevalence of the realty tax is due to the compara- 
 tive ease with which land and other real property can be 
 assessed. Since an early period, the "cadastral" system of 
 assessment has served a useful purpose. Not only for tax 
 purposes, but for statistical, juridical,^ political, and mili- 
 tary purposes, the "Domesday Book" was of invaluable 
 assistance to the government. In modern times, however, 
 an extensive system of accurate valuation and registration 
 of the land by the central government, so far as we know, 
 exists nowhere. The reason is that such a valuation is very 
 expensive and subject to change because of the frequent 
 fluctuations in the value of the land. One of the results of 
 the tax reforms in England has been to necessitate just 
 such an extensive system, and the valuation of all the land 
 in Great Britain is now under way. 
 
 It is difficult to say whether in England the fear of the 
 tax on land value had for a long time prevented an accurate 
 and separate assessment of the land and improvements 
 respectively, or whether the accurate and separate assess- 
 ment was feared as a consequence of the imperial land value 
 duties. 2 At any rate, the most effective argument perhaps 
 against the adoption of rating on land value and the argu- 
 ment which delayed its introduction in England, has been 
 
 ^ Namely, to guide the court in the division and adjustment of the 
 estates of the deceased. 
 
 * That is, the increment and undeveloped land duties were opposed, 
 because the latter at least would necessitate a valuation which might 
 lead to the adoption of rating on land value.
 
 THE TAX IN ITS FISCAL ASPECT 831 
 
 the practical difficulty in the way of an accurate valuation 
 of the site. Although some experts had declared such valua- 
 tion practicable, public opinion generally opposed what 
 was called a hypothetical valuation. Under the theoretical 
 assumption that the tax on land value should fall on eco- 
 nomic rent, and that, therefore, it was necessary to take ac- 
 count of all the capital ever sunk into the soil which might 
 have affected the present value of the site, every one will 
 readily admit the hypothetical character of such a valua- 
 tion. The ascertainment of the exact "location" rental 
 is an impossibility. Professor Seligman makes this clear 
 in the following passage: ^ "Now, it is manifestly not so 
 easy to assess the land values that is, the bare value of 
 the land irrespective of all improvements as it is to assess 
 the selling value of a piece of real estate. For instance, an 
 acre of agricultural land near a large town may be worth 
 $200; but if used for truck-farming, considerably more than 
 $200 may have been expended on it during the last cen- 
 tury or two. Who can tell how much of the $200 present 
 value is the value of the bare land and how much is to be 
 assigned to the labor expended? Under the present method 
 we have at least a definite test the selling value; under 
 the new method we should have no test at all. There is 
 every likelihood, therefore, that the difficulties of the pres- 
 ent situation would be intensified." 
 
 If every reform had to be rejected on account of some 
 theoretical objection little progress would be made. In the 
 case of valuation, the experience in this country with sepa- 
 rate valuations for land and improvements has demon- 
 strated the practicability as well as the usefulness of the 
 system. In fact, the theoretical objection seems unwar- 
 ranted in the present advance made toward the more scien- 
 tific valuation of land. Even admitting that improvements 
 made a century or two ago have had an influence on the 
 present value of agricultural and even urban land, that 
 * Essays in Taxation (1913), p. 77.
 
 8S2 THE TAXATION OF LAND VALUE 
 
 influence could be only slight on land whose value is due 
 almost entirely to the growth of population. As for im- 
 provements made on land in recent years, their cost, in 
 so far as they add to the value of the property, is deducted 
 from the value of the site, and this suffices for all practical 
 purposes. 
 
 One of the important effects of the adoption of the tax 
 on land value will be the development of expert and more 
 accurate, or even scientific, methods of valuation of the 
 land separated from the improvements upon it.^ This is 
 because the system of taxing land value exempts improve- 
 ments from taxation and requires fuU value assessments. 
 But irrespective of this tax, considerable progress has al- 
 ready been made toward accurate valuation. So far as we 
 have been able to ascertain, the best experiments toward 
 a scientific method to displace the crude assessments based 
 on estimate, have been worked out in a few American cities, 
 for example. New York, Newark, Cleveland, etc.'^ In the 
 United States, with the development of the assessment on 
 capital value, some systematic method of valuation was 
 inevitable. It is being realized that not only to avoid the 
 present bickering between the county, state, and city au- 
 thorities and to do away with the inequalities arising from 
 imderassessment, but for business purposes as well, full 
 value assessment is necessary. As some one has pointed 
 out, "if a person is seeking investment for capital he will 
 not ask you what the standard of value is but what is the 
 rate of taxation." ^ And by assessing property at its full 
 value a reduction in rate is made possible. Moreover, such 
 
 ^ The agitation of the Single Taxers for a scientific valuation of the 
 land and improvements and for full-value assessment has been especially 
 influential and promises to eradicate some of the gross inequalities grow- 
 ing out of imdervaluation. 
 
 ' Montreal also is now experimenting with the new method. Cf. Re- 
 port of Assessment Department, City of Montreal (1913), pp. 11-15. Cf. 
 also infra, chapter x. 
 
 * International Conference on State and Local Taxation (1909), p. 348.
 
 THE TAX IN ITS FISCAL ASPECT 333 
 
 an assessment broadens the base on which the municipal 
 loans may be contracted. 
 
 It is furthermore being recognized that to attain accuracy 
 in assessment it is necessary to determine the value of the 
 land and of the improvements separately.^ The system of 
 separate assessment is almost universal in the Australasian 
 colonies and in Canada and is becoming so for England, 
 Ireland, and Scotland. In this country only Indiana, Mon- 
 tana, North Dakota, Wisconsin, New York, and California 
 provide for separate Usting of land and improvements. It 
 is also practiced in a number of American cities in other 
 states.^ The application of the more or less scientific prin- 
 ciples, which have been evolved, to the ascertainment of the 
 value of the site, is as yet confined to less than a dozen 
 cities in the United States.' 
 
 13. How does a scientific method of valuation differ 
 from the present method? In general the assessment of 
 property is now based on an estimate, for which there is 
 more or less warrant, depending largely on the experience 
 of the assessor, the time he can devote to this office, and on 
 the political and personal influences at work. The assessor 
 is guided by the selling price of land, by the rental, and by 
 the assessment returns of the property owner. An expert, 
 scientific valuation, on the other hand, must be based on 
 certain principles of value which will assure uniformity and 
 accuracy, and which will eliminate wholly the influence of 
 personal and political considerations. The possibility of 
 finding a more accurate value than the selling price may 
 
 * Such was the opinion of some of the expert valuers who testified 
 before the different British Select Committees {cf. supra, chapter v), and 
 such is the practice of realty appraisers in the United States. See also 
 Webb, Valuation of Real Estate, p. 6. 
 
 * National Conference on State and Local Taxation (1907), pp. 131 ff. 
 The following cities, besides those using the Somers system of valuation, 
 also list the value of improvements and site separately: Washington, and 
 the cities of New Jersey and Massachusetts. Cf. Report of Commissioners 
 of Taxes and Assessments of the City of New York (1913), p. 120. 
 
 See infra, 13-15.
 
 834 THE TAXATION OF LAND VALUE 
 
 well be questioned. Indeed, if the selling price of every 
 plot of land could always be had the difficulty of valuation 
 would largely disappear. What is actually done is to com- 
 pare the dififerent lots on a block, for example, with one 
 whose selling price happens to be known. It is the basis of 
 this comparison that has been systematized and made 
 scientific. 
 
 What a scientific valuation of real property comprises is 
 summarized in the following resolution which was adopted 
 unanimously at the conference of the International Tax 
 Association in 1911; ^ 
 
 Resolved, that as steps towards an equitable and scientific as- 
 sessment of real estate we earnestly recommend : that the method 
 of assessment in rem be extended to all districts in all states; the 
 preparation and use of tax maps in each taxing district; the sepa- 
 rate assessment of land and buildings; and the use of standard 
 units of measurement as a basis of valuation for both land and 
 buildings to assist the assessor in the exercise of his judgment, 
 such standards of value to be determined for each locality by its 
 officials with the greatest possible cooperation of its citizens, hav- 
 ing due regard to local conditions. 
 
 First, then, the valuation must be impersonal, in rem, 
 not in personam;^ only those factors that influence the 
 value of the site, irrespective of the owner's particular cir- 
 cumstances, irrespective also of the influence of the improv- 
 ments on the site, must be taken account of by the assessor. 
 Secondly, the essential apparatus for the valuation is a tax 
 map. These maps "shall show the area, dimensions, and 
 locations of the real property, and the various subdivisions 
 of ownership." The maps shall be used alike in assessing 
 city and country real estate, mining and forest land. In 
 each case, however, the construction of the map will vary 
 
 > International Conference on State and Local Taxation (1911), p. 25. 
 
 * The assessment in rem does not take the owner into account, as it 
 were, but only the real estate. It is an assessment of real estate geo- 
 graphically located, not in alphabetical order according to owner. Cf. 
 Seligman, Essays in Taxation (1918), pp. 325-26.
 
 THE TAX IN ITS FISCAL ASPECT S35 
 
 according to the unit of measurement. Thus, the lot or 
 block system for urban land is inapplicable for farm land, 
 for which the acre constitutes a more appropriate unit.^ 
 Tax maps have been in use in the city of Newark, New 
 Jersey, for forty years, in Milwaukee, Wisconsin, for nearly 
 twenty years, in the Province of Quebec for even a longer 
 period. 2 In 1907, a "timber cruise" was inaugurated in 
 King County, Washington; maps were then employed 
 which are expected to form an accurate basis for all future 
 valuations.^ Thirdly, the separate valuation of land and 
 buildings is necessary, because the causes of their value are 
 different. Fourthly, the selection of a unit of measurement 
 and of a table to compute the relative values of other tracts 
 of land is requisite to an efficient valuation. The two well- 
 known systems for computing relative values for urban 
 real estate assessment are the Hoffman-Neill Rule and 
 the Somers system.* 
 
 14. The function of the table employed to compute the 
 relative values of different shapes and sizes of land is more 
 important for assessment purposes than even the ascer- 
 tainment of the accurate value of the unit, for it secures 
 uniformity and equality in assessment; and uniformity and 
 equality even exceed in importance the search after ab- 
 solutely accurate values. The "Hoffman-Neill Rule"^ is 
 
 * L. G. Powers has classified non-urban land into eight kinds for assess- 
 ment purposes: (1) acres under cultivation, or being used for meadows; 
 (2) land not under cultivation, but capable of being plowed; (3) land 
 covered with a heavy growth of timber; (4) with orchards; and (5) acres 
 properly classed as waste land because incapable of cultivation or of 
 growing timber; (6) the number of acres of mineral land; (7) of quarry 
 land; (8) land valuable by reason of oil, gas or other deposits. Interna- 
 tional Conference on State and Local Taxation (1909), p. 326. 
 
 * Ibid. (1911), pp. 347-48. 
 
 * It is interesting incidentally that the "cruise" cost $70,000, lasted a 
 year, but resulted in an increased valuation of the timber land in the 
 county of over $12,000,000., ibid. (1909), pp. 335-36. 
 
 * For other rules see Manual on the Methods of Assessment of Real 
 Estate in New York City (1914). 
 
 * The " Rule," first used in New York, ia known by that name because
 
 836 
 
 THE TAXATION OF LAND VALUE 
 
 a table showing the percentage of value for various depths 
 of the unit, which is a 100-foot lot, as follows: ^ 
 
 Fed 
 
 Per cent 
 
 Feet 
 
 Per cent 
 
 Feet 
 
 Per cent 
 
 1 
 
 .0676 
 
 22.... 
 
 .4123 
 
 53.... 
 
 .6899 
 
 2 
 
 .1014 
 
 23.... 
 
 .4232 
 
 54.... 
 
 .6975 
 
 8 
 
 .1286 
 
 24.... 
 
 .4339 
 
 55.... 
 
 .7051 
 
 4 
 
 .1520 
 
 25.... 
 
 .4444 
 
 56.... 
 
 .7126 
 
 5 
 
 .1732 
 
 26.... 
 
 .4548 
 
 67.... 
 
 .7201 
 
 6 
 
 .1929 
 
 27.... 
 
 .4650 
 
 58.... 
 
 .1115 
 
 7 
 
 .2112 
 
 28.... 
 
 .4751 
 
 59.... 
 
 .7348 
 
 8 
 
 .2282 
 
 29.... 
 
 .4850 
 
 60.... 
 
 .7420 
 
 9 
 
 .2443 
 
 30.... 
 
 .4947 
 
 61.... 
 
 .7492 
 
 10 
 
 .2598 
 
 
 
 
 
 
 
 50.... 
 
 .6667 
 
 98.... 
 
 .9882 
 
 20 
 
 .3899 
 
 51 ... . 
 
 .6745 
 
 99.... 
 
 .9941 
 
 21 
 
 .4012 
 
 52.... 
 
 .6822 
 
 100.... 
 
 1.0000 
 
 Having determined the value of one-foot frontage, the 
 assessor, with the help of the above table, is able to ascertain 
 the value of the entire lot. The following is a description 
 of a land- value map when completed: 
 
 An outline map of the city is used, subdivided into such areas 
 as may be convenient. On each side of each street, for each block, 
 the unit value of the normal unit is entered. Thus the relation of 
 value on one street with values on another street is at once ap)- 
 parent. Points showing high value will grade off towards the 
 points showing low values, and everywhere the values on one 
 street will interlock with the values on the next street in a way 
 that can be seen, understood, and explained. Accuracy and pre- 
 cision will be introduced into an assessment. The disturbing in- 
 
 Judge Hoffman a half-century ago, in deciding a lawsuit before him, laid 
 down the rule that the ordinary city lot fifty feet deep was worth two- 
 thirds as much as an adjoining lot one hundred feet deep. Cf. Interna- 
 tional Conference on State and Local Taxation (1911), p. 351. 
 
 * Montreal has adopted the " Hoff man-Neill Rule" for determining 
 the value of lots of a greater or less depth than one hundred feet. See 
 Report of Assessment Department, City of Montreal (1913), pp. 12-13, 
 where the whole table of which the above is an incomplete copy is given. 
 See also International Conference, etc. (1911), p. 360.
 
 THE TAX IN ITS FISCAL ASPECT 8S7 
 
 fluences of abnormally high or abnormally low sales will be mini- 
 mized, and the assessor will be doing what he ought to do; namely, 
 exercising his judgment in assessing all lots within a given area in 
 their relative values to one another.* 
 
 The most difficult problem that the assessor encomiters 
 under this system is the valuation of corner lots. It is ob- 
 vious that a corner lot has more value than an inside lot. 
 There is no standard under the Hoffman-Neill Rule, how- 
 ever, as to hovjr much greater the value is. "All that we can 
 at present say on this point is that the consensus of opinion 
 appears to be that corner influence varies according to the 
 use to which the property is put, being greatest in retail 
 business districts, and smallest in suburban residence dis- 
 tricts." 2 The accuracy of this new system of valuation, 
 mechanical and hypothetical as it may seem, can be sur- 
 mised from the fact that purchases and sales of property in 
 New York City are based on the same scale or rule as the 
 assessor uses.' 
 
 15. Based on the same principle, namely, that there is a 
 mathematical relation between the values of the different 
 city sites affected by the same influences, but with a some- 
 what different method of computation of this relationship, 
 the Somers system of valuation has been devised.^ This 
 system is more complete than the Hoffman-Neill Rule, for 
 besides the table of percentage of value of different depths 
 of lot, Mr. Somers has worked out a scheme of valuing 
 
 1 Intemaiional Conference on State and Local Taxation (1911), p. 853. 
 For a more detailed account of the "Rule" see Craigen, Practical Methods 
 for Appraising Lands, Buildings, and Improvements. 
 
 ' Ibid., pp. 353-54. 
 
 ' In Chicago a similar plan for computing the value of urban land was 
 worked out, but according to the Manufacturers' Appraisal Company, for 
 whom Mr. Somers has become land valuation actuary and who have pur- 
 chased control of his system, the Chicago plan is less scientific and less 
 accurate. Cf. Report of Manufacturers' Appraisal Company, Analysis of 
 the Chicago Assessors^ Plan of Computing Site Values, etc. 
 
 * Somers, The Valuaiion of Real Estate for the Purpose of Taxation. 
 See also The Somers Unit System of Realty Valuaiion (pamphlet issued by 
 the Manufacturers' Appraisal Company).
 
 338 THE TAXATION OF LAND VALUE 
 
 corner ^ and alley lots, as well as other irregular and excep- 
 tional shapes and sizes of land. Very noteworthy also is 
 the method of ascertaining the value of the "unit foot." 
 "A unit foot is a frontage of ground one foot wide and 100 
 feet deep, located in the central section of a block at a dis- 
 tance from any street corner or other influence that might 
 affect its value, other than which it obtains by reason of 
 access to the life and business of the city through its own 
 frontage." ^ To appraise the unit, persons with a knowl- 
 edge of urban conditions, and of realty values are called 
 in. Thus the system invites publicity and public interest. 
 " There always exists in cities," says Mr. Somers,^ " a Com- 
 munity Opinion that a certain street is the best for busi- 
 ness and a consequent idea that land fronting thereon is 
 the most valuable. From this most valuable street other 
 streets of less value will be compared, a well-defined opin- 
 ion being present that the property on the less valuable 
 street is less valuable just in proportion as the street is less 
 valuable, and the comparison will reach out from the cen- 
 ter or best p>ortion and embrace the entire city. . . ." 
 
 To appreciate the method of establishing the value of 
 the unit by ** Community Opinion " we quote the following 
 procedure in the valuation of Cleveland: "The City Ap- 
 praisal Board of Cleveland estimates tentatively the unit 
 values of the various streets, beginning at the Public 
 Square and working out in every direction to the corpora- 
 tion limits.* By means of maps and a campaign of pub- 
 
 * There is much skepticism among taxing authorities as to the prin- 
 ciple underlying Somers' tables for computing the value of comer lots. 
 Mr. Somers keeps his process secret. 
 
 * Vancil, Somers Unit System of Realty Valuation, p. 1. ' Op. cit., p. 19. 
 
 * " The Board adopted the rule that property should be valued on the 
 basis of the best use of it, i.e., a lot in the business section which was being 
 used for residence purposes should be valued as business property. The 
 owner and not the public, should bear the loss if the property were put to 
 any other than its best use. Another rule followed was that thorough- 
 fares, which were defined as the main channels of trade and travel, should 
 be valued uniformly higher than the minor streets."
 
 THE TAX m ITS FISCAL ASPECT 
 
 839 
 
 licity in the city newspapers, these tentative valuations 
 are scattered broadcast, and the community is invited to 
 discuss them. At a series of pubHc meetings of the Board, 
 section after section of the city is covered, many parts being 
 gone over several times, until all interested persons are 
 given ample opportunity to appear before the Board and 
 submit evidence in favor of changing the tentative unit 
 values. After being thoroughly debated by the public in 
 this manner, the unit values finally agreed to by the ma- 
 jority are regarded as representing the consensus of opin- 
 ion. These unit values are confirmed by the Board, and are 
 not open to further discussion." ^ When these unit values 
 have been thus agreed upon, the individual lots are then 
 valued in accordance with a systematic table or curve of 
 values. Corner lots and those abutting upon the alleys, and 
 lots near corners or alleys are appraised according to a 
 complicated table, whose underlying principle is that the 
 influence of corner proximity on the value of the lot ex- 
 tends both ways from the corner, growing less as the dis- 
 tance from the corner increases, until it disappears. In the 
 following table the apphcation of this principle is illustrated 
 in part merely: ^ 
 
 Ratio of poorer frontage 
 
 Ratio of comer lot to 
 
 Ratio of second 
 
 to better 
 
 middle lot 
 
 lot 
 
 .1 
 
 1.11 
 
 
 .2 
 
 1.14 
 
 i.ia 
 
 .8 
 
 1.17 
 
 1.03 
 
 .4 
 
 1.22 
 
 1.03 
 
 .5 
 
 1.28 
 
 1.04 
 
 .6 
 
 1.86 
 
 1.05 
 
 .7 
 
 1.48 
 
 1.06 
 
 .8 
 
 1.60 
 
 1.08 
 
 .0 
 
 1.74 
 
 1.10 
 
 1.0 
 
 1.90 
 
 1.12 
 
 * Lutz, " The Somers System of Realty Valuation," in Quarterly Jour- 
 nal of Economics, vol. xxv, p. 174. 
 
 * First National Conference on State and Local Taxation (1907), p. 132.
 
 S40 THE TAXATION OF LAND VALUE 
 
 The above table shows "the ratios assumed to exist be- 
 tween the values of the corner and second lots, and of the 
 middle lots, where the lots are twice as long as they are 
 broad and the corner lot has its shorter frontage on a street 
 where the frontage is worth twice as much per foot as on 
 the side street, these middle lots also fronting on the better 
 street." ^ 
 
 The Somers system of valuation, of which the above 
 description is brief and inadequate, was first put into opera- 
 tion by Mr. Somers in St. Paul, Minnesota, as early as 
 1896. Since then the following cities have tried the sys- 
 tem: Columbus, Cleveland, Ohio, Philadelphia, Pennsyl- 
 vania, Springfield, East St. Louis and Joliet, Illinois, 
 Denver, Colorado, Houston and Beaumont, Texas. 
 
 The appraisal of buildings has also been systematized. 
 Blank forms are used for gathering the data descriptive of 
 the structures. The basis of the valuation is the cost of 
 reproduction of the building minus the value of the de- 
 preciation. The cost and depreciation factors are based on 
 the assessor's estimate, the valuation is then computed 
 mechanically, the square foot of floor space being the unit 
 of calculation.^ 
 
 The advantages of a systematized method of assess- 
 ment as compared with the haphazard guess-work of the 
 prevailing system need no elaboration. More than that, 
 the scientific, expert valuation on lines described above will 
 exert a wholesome influence on the community socially. For 
 example, one result would be the awakening of discussion 
 and interest among the property owners, who will be urged 
 and called upon to appraise the unit foot. Such participation 
 
 * For the determination of lots abutting upon the alley and of irregular 
 shap>ed lots " where a high value from one street overlaps a lower value 
 from another street," for example, other methods are employed. See 
 pamphlets issued by the Manufacturers' Appraisal Company. 
 
 * The Somers Unit System of Realty Valuation (pamphlet issued by the 
 Manufacturers' Appraisal Company), p. 10. See also Report of Commis' 
 turners of Taxes and Assessments of New York (1913), pp. 136-39.
 
 THE TAX IN ITS FISCAL ASPECT S41 
 
 cannot fail to arouse public spirit and interest in one of 
 the most essential, but shunned, fields of legislation, taxa- 
 tion. The efficiency of the assessors and of the other tax 
 officials will also follow; while the economic influences of 
 the standardization of the value of real estate, upon con- 
 tracting loans, and upon realty investment, for example, 
 will likewise be advantageous. Moreover, the taxpayer 
 will be able to compare his assessment made in rem with 
 that of his immediate neighbors, which under the system 
 of in personam assessment is not so simple. 
 
 16. The classification, underlying principles, and fiscal 
 expediency of the tax on land value having been discussed, 
 there remains the consideration of the objections raised 
 against its levy. The most vehement opposition which the 
 . new proposal has to brook grows out of its identification 
 ^'"'^ with the Single Tax. ^ The apprehension is current that the 
 tax is merely the entering wedge to the Single Tax regime. 
 Bearing in mind the differentiation made between the two 
 proposals, however, most of the objections vanish. For 
 example, such questions as the elasticity of the yield, which 
 for the Single Tax is an all-important query, becomes in- 
 significant for a subsidiary impost. So also with regard to 
 the discriminatory, confiscatory character of the tax, and 
 with regard to the generally accepted theory of justice in 
 taxation. If the land-value tax be opposed on any such 
 ground, any of the numerous excise duties, or the inheri- 
 tance tax, must be similarly opposed. On the contrary, 
 it has been argued that by the new land tax the govern- 
 ment aims merely to shift or to impose a heavier burden of 
 taxation, occasioned by the ever-increasing budget, on a 
 class which is thought to be best able to bear it; just as is its 
 purpose always in choosing one object, rather than another, 
 
 ^ It is almost entirely through fear of the adoption of the Single Tax 
 that Professor Bullock opposes local autonomy in taxation, as is in- 
 dicated strongly in his article in International Conference on State and 
 Local Taxation (1911), p. 271. See also Prof essor Seligman, in The Survey, 
 March?, 1914, pp. 697/.
 
 342 THE TAXATION OF LAND VALUE* 
 
 for revenue purposes; that, in exempting improvements 
 from taxation, the aim is to appropriate a greater share of 
 the profit arising from land ownership, and at the same 
 time reheve the capital invested in improvements and 
 buildings. Whatever the social and economic effects may 
 be, the proposal seems fiscally justifiable.^ As to the ex- 
 
 * Professor Seligman brings forward certain objections to the Herrick- 
 Schaap Bill, a proposal to untax buUdings in New York City, which it 
 may be profitable to touch upon at this point, in so far as they are fiscal 
 in character. (See rAeSuroey, March?, 1914, pp. 697 j^.) (1) Concerning 
 the fiscal theory of the tax it violates even the theory of "Benefits" inas- 
 much as the buildings which it proposes to untax derive benefit from the 
 public expenditures. Consider fire and police protection (p. 700). It is 
 noteworthy that in Canada this has been urged repeatedly against the ex- 
 emption of improvements. But the theoretical objection had little weight 
 there, in view of the object to promote industry and business. It will 
 scarcely be denied that the high rent paid by retail dealers, for example, 
 enters more or less into the price of the commodities. Nor will it be denied 
 that in many urban communities the tax on buildings is heavier than on 
 other forms of capital. The consequence of this is that the tax is borne 
 not by the owner of the skyscraper, but by the general consumer, and as 
 Professor Seligman points out, by the big banks, the big lawyers, etc. 
 (2) With regard to the incidence of the tax he holds that so much of the 
 tax as does not fall on pure rent, but falls on improvements sunk in the 
 land, will be borne by the tenant, not by the owner (p. 698). Hence the 
 increased tax on that part of the land value will tend to be shifted in part 
 to the tenant. From a theoretical standpoint, in urban communities, 
 land-value increments are attributable primarily to the congestion of 
 population. But, whatever of the value added by the improvements simk 
 in the land escap>es exemption under a system of expert valuation may be 
 regarded as in the nature of old and fixed structures. The tax on such a 
 value would as likely fall on the owner as on the tenant, unless the invest- 
 ment for rock excavations, etc. were the general practice. From a practi- 
 cable standpoint, the hypothetical diflScultiies in valuation have given the 
 assessors in western Canada and Australasia little concern. Land and 
 improvements are there assessed separately as a matter of course. (3) The 
 introduction of the tax on land value in New York City would result in a 
 decline in the value of the land as Professor Seligman points out (p. 701). 
 This would not only narrow the base of taxation, but would narrow the 
 base of assessment by which the amount of indebtedness that may be 
 incurred by municipalities is limited. It may be true that a constitutional 
 amendment would be necessary in the case of New York City, and the 
 tax may be, therefore, locally inexpedient. But the principle of the tax, 
 and its expediency elsewhere are not invalidated thereby. It is interest- 
 ing to point out a few changes which the tax might occasion in New York
 
 THE TAX IN ITS FISCAL ASPECT 343 
 
 tent to which the share of the state should be increased, the 
 community must be guided by local conditions, the rate of 
 increase of value increment of land, the amount of revenue 
 needed, the expediency of exempting other forms of in- 
 come, and so forth. 
 There is, however, one serious objection which we have 
 
 City. Real estate is in this city assessed at very nearly the full value, 
 and the land is listed separately from the improvements. Assuming 
 that the rate of increase in the value of all the land, which the tax 
 commissioners of New York City estimate at from four to five per 
 cent annually, will counterbalance the fall in value as the result of the 
 tax, the rate of tax will have to be raised through the exemption of 
 all the improvements. Taking all five boroughs comprising New York 
 City together, it is found that 37.9 per cent of the assessment in 1913 
 was on buildings. In order, then, to raise the same revenue as in 1913, 
 the rate of tax would be increased from $1.81 on $100 to about $2.92. 
 Whether the constitutional requirement which limits the rate to two 
 per cent could be amended or not, it is interesting to note that in 1899 
 the rate was $2.48 for Manhattan and $3.27 for Queens. This reduc- 
 tion in tax rate on real property since 1899 means that purchasers of land 
 before that year, and in fact before 1902 (see table on p. 92 of Report of 
 Commissioners of Taxes of New York, 1913), according to the principle of 
 " amortization," were granted a donation as it were. By raising the rate 
 under the new system the long-time owners will have little cause to com- 
 plain. It must, however, be borne in mind that the increased rate will not 
 necessitate an increase in the amount of tax for all landowners. All those 
 whose property has upon it structures of a value of at least 37.9 per cent 
 the value of the site will find their tax bill either the same or reduced 
 under the land- value tax; only those whose land is unimproved will bear 
 a heavier burden. The fact that the value of the land in certain sections 
 of Manhattan is nearly 70 per cent of the assessment corroborates the con- 
 tention that the buildings there are not as they should be to accommodate 
 the congested population. Brooklyn, the town of small dwellings, on the 
 other hand, and which has called forth recently commiseration on ac- 
 count of the excessive assessment (see Cederstrom, Unjust Taxation) 
 will be most relieved through the new system, because the value of im- 
 provements in Brooklyn exceeds the ratio existing between buildings and 
 land values in Greater New York taken as a whole. For the probable 
 redistribution of tax burden on the different classes of landowners result- 
 ing from the untaxing of buildings, cf. Haig, Some Probable Effects of the 
 Exemption of Improvements from Taxation in the City of New York. 
 
 The changes proposed by the Herrick-Schaap Bill will be slighter 
 than those incurred by the total exemption of improvements and will be 
 discussed in chapter x. The non-fiscal objections of Professor Seligman 
 to the tax are treated in the following chapters.
 
 SU THE TAXATION OF LAND VALUE 
 
 not yet discussed in this chapter, namely, the relative ex- 
 pediency of introducing the tax on land value in urban and 
 rural communities. It is claimed that the tax would oc- 
 casion a greater hardship on rural districts than on urban 
 municipalities. The reason is that in the latter the value 
 of the improvements and buildings exceeds the value of the 
 site, whereas in the coimtry the reverse is true. Now, if im- 
 provements are exempted from the tax, the rural communi- 
 ties will bear the heavier burden as compared with the 
 cities. First, as to the facts with regard to the assessment. 
 In New York City, in Boston, in Montreal, and other old 
 cities the land value has been found to exceed that of the 
 improvements. In Greater New York land value in 1913 
 constituted 62.1 per cent of the total assessment; in Mon- 
 treal and Boston about the same.^ In Brooklyn the per- 
 centage of building to land value was greater than in Man- 
 hattan (49.8 per cent to 34 per cent), in spite of the fact 
 that the skyscrapers and mansions are in Manhattan. Sta- 
 tistics about other cities are unavailable because the land 
 and buildings are not listed separately. But in Baltimore, 
 according to Lawson Purdy,^ the value of the buildings is 
 fifty-six per cent of the total value. In the rural districts 
 farm land has on the whole the higher value relatively to 
 buildings.' Nevertheless, exceptions were found to this 
 general characteristic in a nmnber of counties in New 
 England and east central states. In the following states 
 the value of the buildings on farms exceeded that of the 
 
 * Report of the Commissioners of Taxes and Assessments in New York 
 (1913), pp. 2&-53; Report of Assessment Department, City of Montreal 
 (1913), p. 4. 
 
 ' First National Conference on State and Local Taxation (1907), p. 879. 
 
 * Taking the country as a whole, less than 20 per cent of the combined 
 value of all the farm land and buildings represented the value of the build- 
 ings. Oidy in New England and the middle Atlantic states did the value 
 of the buildings on farms approach near the value of the land. In New 
 England, in fact, the buildings and the farm machinery and implements 
 exceeded the value of the land. Cf. Thirteenth Census of the United States 
 (1910), vol. V, Table 20.
 
 THE TAX IN ITS FISCAL ASPECT S45 
 
 land in 1910: Pennsylvania, in ten counties; New York, 
 in ten; Maine, in nine (total number of counties, 16); 
 Connecticut, in four; Massachusetts, in two; New Hamp- 
 shire in one; New Jersey, in two; Vermont, in four; Rhode 
 Island, in one.^ Moreover, if farm machinery, implements, 
 etc., were added to the buildings, a legitimate assumj)- 
 tion in view of the purpose of the tax to exempt all im- 
 provements, the land would show the smaller value in 
 many more cases. 
 
 But in the main we may assume that the value of the land 
 in the country is higher relatively to that of the structures 
 than in cities. What will be the burden on rural land- 
 owners? That will depend upon the method of levy and 
 assessment. If the tax is raised for state or even county 
 purposes, and is apportioned according to valuation,'^ the 
 relative burden of rural districts may be inordinately in- 
 creased under the taxation of land value. Thus, in Aus- 
 tralasia, in those cases where the tax is obligatory, the rural 
 districts were said to be proportionately more burdened 
 than the urban mimicipalities. But where the principle 
 of local option is instituted, local conditions will deter- 
 mine the expediency of the tax in the various districts. In 
 those poorer communities where land even has not a suf- 
 ficient value to yield any considerable revenue, 'other taxes 
 must be levied. It is noteworthy, nevertheless, that in both 
 Australasia and in western Canada, among the localities 
 that have optionally adopted the tax on land value are 
 many rural communities.* In the country, when levied for 
 
 * Thirteenth Census of the United States (1910), vols, vi, vii. 
 
 * As compared with apportionment by expenditure or revenue. Cf. 
 Seligman, Essays in Taxation (1913), pp. S59ff. 
 
 Ibid., p. 85. 
 
 * A contributor to The PtcUic (August 22, 1913) claims that the reform 
 in taxation in western Canada is a farmers' movement. " These Canadian 
 farmers are not satisfied, however, to have only municipal taxes levied on 
 the land. Their organizations . . . have expressed themselves as in favor 
 of levying all taxes. Dominion, Provincial, and Municipal on land values " 
 (p. 800). The President of the United Farmers of Alberta spoke as fol-
 
 346 THE TAXATION OF LAND VALUE 
 
 local purposes, or even when levied for state or county pur- 
 poses, provided the apportionment of the quota of the tax 
 among the locaUties is made according to the expenditure 
 of the respective localities,^ the exemption of structures 
 will not increase the rate of tax much over the present rate, 
 because of the relatively small value of the buildings. The 
 solution of the difficulty raised by the objection would 
 seem to be local option in taxation, which the rural dis- 
 tricts especially need to rid themselves of the tax on per- 
 sonal property as well.' 
 
 Finally, it may be asked which form of the tax is fiscally 
 most expedient. Obviously the reply will differ according 
 to the purpose of the tax and the conditions in the various 
 countries. In the United States, where real estate taxa- 
 tion prevails, but where value-increment and indirect land 
 taxes are unknown, and where progressive taxation was 
 until recently practically non-existent and is yet unpopu- 
 lar, the annual, direct tax would seem more expedient than 
 the European forms. Moreover, we lack the conditions of 
 land tenure of England to seek the more discriminatory 
 forms of the tax. For general purposes and for local revenue 
 the exemption of improvements, scientific valuation, and 
 full value assessment, would have the effect of taxing the 
 "unearned increment" accruing from landownership, 
 without introducing the novel system of value-increment 
 and progressive rates.^ Nevertheless, where the fiscal con- 
 lows in his Annual Report: "Few realize the importance of, and what 
 Single Tax really will accomplish. Let me point out some of its most im- 
 portant recommendations. It will take the weight of taxation oflF the 
 agricultural districts, where land has little or no value, irrespective of 
 improvements, and put it on towns and cities where bare land rises to the 
 value of millions of dollars per acre. . . . Thus the farmer would have to 
 pay no more taxes than the speculator," etc. United Farmers of Alberta, 
 Official Report (1912), p. 9. 
 
 ^ Cf. Purdy, Local Option in Taxation. 
 
 * Reasons for the social inexpediency of the tax on rural land is dis- 
 cussed infra, in the following chapters. 
 
 ' It is doubtful whether certain fiscal authorities in this country would
 
 THE TAX IN ITS FISCAL ASPECT S47 
 
 sideration is not uppermost and where taxes are levied for 
 special purposes, the value-increment tax has certain ad- 
 vantages: first, its collection is simple; secondly, it can be 
 levied on future increment only, thus interfering less with 
 the present owner's expectations of profit; thirdly, it lends 
 itself better to the progressive scale of rates. In view of the 
 system of realty taxation in this country, however, these 
 considerations have less value for the United States.* 
 
 favor the value-increment tax in preference to the annual, direct tax on 
 land value, if the spectre of the Single Tax regime were to them less im- 
 minent. 
 
 ^ The machinery for assessing and collecting the direct tax already 
 exists in this country.
 
 CHAPTER Vin 
 
 THE TAX AS A SOCIAL REFORM 
 
 1. If it is true of all taxes that the fiscal considerations 
 are not to be divorced from the economic and other effects 
 in judging of then: expediency, it is especially important to 
 consider the economic and social effects of the tax on land 
 value. As a modified realty tax, the proposed changes in- 
 volved in the tax on land value must be discussed in all 
 their aspects. While no one will dispute the expediency and 
 necessity of full-value assessment and of scientific valua- 
 tion of real property, there is less unanimity of judgment 
 with regard to the exemption of improvements from taxa- 
 tion. This is not strange when we consider that some funda- 
 mental social problems are involved in the proposal to ex- 
 empt improvements. There is no agreement upon the 
 meaning and prevalence of "unearned increment" and of 
 speculation in land, nor upon the seriousness of the so-called 
 housing problem in the various communities; while the 
 whole problem of property in land will ever remain a logi- 
 cally controversial one. The best that can be done is to 
 attempt to understand the nature of the above-mentioned 
 problems in the light of the facts under the existent order; 
 to examine certain social evils and the proposed reforms; 
 and to test the efficacy of the tax on land value as a social 
 reform by the effects of its operation where it exists. 
 
 It will be agreed that the most currently potent argu- 
 ment for the taxation of land value is that land rent is an 
 "unearned" increment. The justification of this view is 
 based on the rent concept explained in the preceding chap- 
 ter. Now, the criticism generally directed by economists 
 and laymen alike against the tax is that land rent is not the 
 sole differential, that other incomes are likewise "im-
 
 THE TAX AS A SOCIAL REFORM 349 
 
 earned." Thus quasi-rents arising from capitalistic enter- 
 prises, from speculation in general, and even from nat- 
 ural ability ^ are likewise called "unearned" increments. 
 As commonly understood "unearned" increment is any 
 surplus value accruing to an individual not by virtue of 
 sacrifice or exertion on his part, but by virtue of his prop- 
 erty right to a commodity. But it is also questioned whether 
 even a transaction in landed property does not involve some 
 labor on the part of the owner. Whatever view we admit, 
 so much is certain. There is a tendency in recent years to 
 diflferentiate between income accruing to labor in its widest 
 sense including entrepreneurship, and that accruing from 
 the investment of capital in any form. The latter is com- 
 monly considered the source of the enormous wealth ac- 
 cumulated by individuals which, it is evident, the modern 
 "Sozialpolitik" would prevent. Misleading as the term 
 " unearned " income may logically appear, it will probably 
 be retained, since English and German legislation has recog- 
 nized the distinction between earned and imearned income.* 
 
 Just as in the case of monopoly and large scale capitalistic' 
 production, legislation has been employed to check the 
 concentration of wealth in the interest of the social well- 
 being, so with regard to the land-value increments, it is 
 proposed to prevent some of the putative evils by means 
 of a tax. The fiscal expediency of the proposal having been 
 discussed,^ the problem is now to discover (1) whether 
 those putative increments in land value are of widespread 
 occurrence, if they occur at all, (2) the causes and the 
 social evils that ensue therefrom, and (3) the effectiveness 
 of the tax to remedy the evils. 
 
 2. What are the facts concerning the appreciation in 
 the value of the land? The diflBculties encountered in at- 
 
 * Cf. Marshall, Principles of Economics (5th ed.), p. 579. 
 
 * Cf. the English income tax and the German "Wertzuwachssteuer" 
 where the term "unearned" is employed. 
 
 * See supra, chapter vu.
 
 350 THE TAXATION OF LAND VALUE 
 
 tempting an answer become apparent when we consider 
 
 the several kinds of land, the lack of uniformity in the 
 
 development of the several comitries, the social, economic, 
 
 and physical differences of communities, and the inadequate 
 
 data due partly to insufficient information, partly to the 
 
 practice of assessing, as a single class of property, both 
 
 the land and improvements upon it. 
 
 / To begin with, it will be necessary to classify land into 
 
 / three main categories: 
 
 S, (1) Land used in the production of raw stuffs, i.e., agri- 
 
 V\ cultural land which forms the main source of human sus- 
 Itenance. 
 J / (2) Land necessary for dwellings and industrial pur- 
 poses, i.e., urban land. 
 
 (3) Land containing the product in a form ready for use 
 / in contradistinction to that requiring fertilization 
 
 7- 
 
 kl i.e., mines and forests. 
 _ 
 
 ^p^ / The following considerations make the distinction be- 
 
 / tween rural and urban land apparent: First, agricultural 
 / production must be put in a class by itself. And it must 
 / be borne in mind that as yet the prevaiUng unit in agricul- 
 
 1 tural industry is the small farm. Secondly, the transition 
 
 I from extensive to intensive farm cultivation has been very 
 
 much retarded on account of the relative abundance of vir- 
 gin soil. Thirdly, the demand for urban land is not merely 
 for industrial purposes. The demand is composite; for it 
 is a demand also for dwellings by a comparatively numer- 
 \ ous population in a comparatively hmited area. Fourthly, 
 
 \the unit of valuation of rural land is the acre, as compared 
 with the lot in towns. The third kind of land, namely, nat- 
 ural resources in a limited sense, must be differentiated 
 from the other kinds for many reasons. Unlike the other 
 kinds, mines and forests belong in the category of wasting 
 assets.^ Upon their proper use or misuse, therefore, de- 
 
 * In a larger sense this is true also of agricultural land which may be 
 used up through a careless, extensive cultivation.
 
 THE TAX AS A SOCIAL REFORM 
 
 351 
 
 pends the welfare of society. Hence in considering this 
 kind of land, the whole problem of conservation confronts 
 us. 
 
 In the following sections, then, we may expect to find 
 the tendency of values in the three kinds of land to vary 
 not only with regard to one another, but with regard to 
 the diverse conditions of place, population, and stage of 
 development. 
 
 3. The discussion of agricultural values necessitates 
 a fm-ther division, for the lands under cultivation in the old 
 countries are not comparable to the virgin soils of Austral- 
 asia and America. Bearing this fact in mind, we shall first 
 present some data regarding the European situation, and 
 then shall endeavor to show the tendency of value changes 
 in the newer countries. 
 
 TABLE SHOWING THE RENTAL OF AGRICULTURAL 
 LAND IN THE UNITED KINGDOM, 1750-19041 
 
 Year] 
 
 Rental in millions () 
 
 Per cent of change in value 
 
 1750 
 
 1776 
 
 1800 
 
 1815 
 
 1843 
 
 1860 
 
 1870 
 
 1880 
 
 1888 
 
 1894 
 
 1904 
 
 16.6 
 
 22.4 
 
 32.6 
 
 46.5 
 
 54.4 
 
 58.3 
 
 64.1 
 
 69.5 
 
 61.2 
 
 56.2* 
 
 52.0 
 
 increase, 34.9 
 
 45.5 
 
 " 46.5 
 
 " 17.0 
 
 7.1 
 
 9.1 
 
 8.5 
 
 decrease, 11.9 
 
 8.1 
 
 7.1 
 
 * This figure was obtained from Mulhall, Indxutries and Wealth of Nations, p. 406. 
 
 From the above table we note that the rental value rose 
 steadily until early in the nineteenth century, held its own 
 
 1 Mulhall, Dictionary of Statistics (1899), p. 341; the figures before 1870 
 are estimates; from that date, the figures are those taken from the Reports 
 of Inland Revenue. Cf. Agricultural Statistics (Cd. 3870), 1907, Table 
 
 XXIV.
 
 S52 THE TAXATION OF LAND VALUE 
 
 until the eighties, although the percentage of increase 
 diminished gradually, and since the eighties has declined 
 considerably. The tendency of agricultural land values in 
 the United Kingdom (1781-1880) to fluctuate about an 
 average, showing comparative stability and appreciation 
 in the price of the land, is illustrated also by the following 
 table: 
 
 AVERAGE PRICE OF FARM LAND PER ACRE 
 
 1781-1800 33.8 
 
 1801-1820 36.2 
 
 1821-1840 23.7 
 
 1841-1860 36.4 
 
 1861-1870 43. 
 
 1871-1880 61.3 
 
 Average price 35.1 
 
 Evidence of the decline in agricultural land values in 
 Great Britain since the eighties is abundant. For example, 
 the Royal Commission on Agriculture of 1895 ^ quoted 
 numerous illustrations of the decline in rental; in fact 
 cases occurred where no rent could be paid. That this de- 
 pression has continued to the present the following state- 
 ment by Professor Nicholson' is evidence: "The conclu- 
 sion, then, is that for the last half centmy instead of an 
 unearned increment from agricultm^al land, there has been 
 an unearned (and certainly undeserved) decrement." 
 
 Turning to France the situation regarding agricultural 
 land values is similar to that in England. In France " land 
 trebled in value between 1817 and 1879, but it has since 
 fallen one-third." * This estimate is borne out by the fol- 
 lowing table showing the value of arable land in France : ^ 
 
 * Mulhall, Dictionary of Statistics (1899), p. 759. Average prices of 
 estates sold in those years. 
 
 * See Final Report of the Royal Commission of Agriculture, 1894-97 
 (C. 8540), pp. 207-08; also Particulars of Expenditures and Outgoings, 
 etc. (C. 8125), 1896, pp. 40/. 
 
 ' Rates and Taxes as Affecting Agriculture, p. 72. 
 
 * Mulhall, Industries and WeaWi of Nations, p. 413. ^ Ibid.
 
 THE TAX AS A SOCIAL REFORM 
 
 353 
 
 Year 
 
 Value in millions () 
 
 Per cent of change in value 
 
 1817 
 
 548 
 2,801 
 2,986 
 1,386 
 
 
 1879 
 
 1881 
 
 1895 
 
 increase, 319.8 
 
 29.7 
 
 decrease, 53.2 
 
 From another source of information, the percentage of 
 decrease in the value of agricultural land in France was 
 estimated at less than appears from the preceding figures.^ 
 This more conservative estimate was derived after a care- 
 ful valuation of the land in 13,606 French communes, 
 covering, therefore, a large part of the territory of France. 
 From 1879 to 1884 the rural land in these communes was 
 valued at 783,636,000 fr.; in 1909-10 the value had fallen 
 to 616,540,000 fr., or 21.3 per cent. Another authority- 
 estimates the dechne in the value of farm land at forty per 
 cent.* Although the estimates of the extent of the depres- 
 sion vary, the fact remains that during the last generation 
 the value of agricultural land has considerably depreciated. 
 
 Belgium has been likewise affected by the agricultural 
 depression of the eighties. The average value of farm land 
 per hectare declined from 4261 fr. in 1880 to 2838 fr. in 
 1895, about thirty-one per cent; the rental value declined 
 during the same period from 107 fr. to 90 fr.^ Ample evi- 
 dence exists to show that this trend of values has been 
 general throughout Europe. 
 
 The causes for this situation are not far to seek. They 
 are to be found chiefly in the low prices of grain due to 
 American and AustraUan competition, resulting from the 
 
 * International Institute of Agriculture. Bulletin of Bureau of Economic 
 and Social Intelligence, vol. xviii, April, 1912, pp. 220 jf. The author esti- 
 mates the depression in the price of typical holdings from 600 fr. in 1856 
 to 210 fr. in 1908, or 65 per cent. 
 
 * Cf. Congr^s International de la ProjmStS Fonciere (1900), p. 561. 
 
 * Annuaire Siatislique de la Belgique (1902), vol. xxxin, p. 291.
 
 854 THE TAXATION OF LAND VALUE 
 
 improved facilities for transportation, and in the greater 
 profitableness of manufacturing industries. An effect which 
 is at the same time a proof of the general condition of agri- 
 cultural depression in Europe is the marked decrease in the 
 rural population. For example, the English rural popula- 
 tion, which was 42 per cent of the total population in 1771, 
 constituted 22 per cent of the total in 1841 and less since 
 then; ^ the agricultural population in Belgium fell from 
 24.98 per cent to 18.79 per cent of the total population from 
 1846 to 1895.2 jjj Grermany too the percentage of those en- 
 gaged in agricultural production decreased from 42.5 per 
 cent in 1882 to 28.65 per cent in 1907.' 
 
 4. But while value decrements, not value increments, 
 characterize European farm land, the opposite tendency 
 seems characteristic of the newer countries. Generally 
 speaking, with the progress of the nineteenth century to 
 the present, with the introduction of railroad and improved 
 waterway transportation, the superior fertility of the soil 
 in America and Australasia caused an extension of the 
 grain market to a world market, while the growth in pop- 
 ulation had the same effect, an increased demand for agri- 
 cultural land. The result has been a corresponding in- 
 crease in the value of farm land as the accompanying table 
 shows. 
 
 It is obvious that to determiae precisely the real in- 
 crease in the value of the land when farms and buildings 
 are classed together as in the subjoined table is impossible. 
 Nevertheless, as the ratio of the value of the buildings to 
 that of the land in the country is small, the degree of error 
 in estimating the percentage of increase can be but slight. 
 It will be noted that while the number of farms since 1850 
 increased nearly 339 per cent, the value of the farm land 
 
 * Weber, Growth of Cities in the Nineteenth Century, Columbia Univer- 
 sity Studies in Political Science, vol. xi, p. 166. 
 
 * Annuaire Staiistique de La Belgique (1902), vol. XSXni, p. 272. 
 Handbuch der Politik, vol. u, p. 263.
 
 THE TAX AS A SOCIAL REFORM 
 
 355 
 
 INCREASE IN THE VALUE OP FARM PROPERTY AND 
 IN AGRICULTURAL PRODUCTION IN THE UNITED 
 STATES 1 
 
 Year 
 
 No. of farms 
 
 No. engaged in 
 agriculture 
 
 Value of farms and 
 buildings 
 
 1850 
 
 1,449,073 
 2,044,077 
 2,659,985 
 4,008,907 
 4,564,641 
 
 5,737,372 
 6,361,502 
 
 6,922,471 
 
 8,565,926 
 10,438,219 
 
 12,659,203 
 
 $3,271,675,426 
 
 1860 
 
 6,645,045,007 
 
 1870 
 
 7,444,054,462 
 
 1880 
 
 10,197,090,776 
 
 1890 
 
 13,279,252,649 
 
 1900 
 
 (13,058,007,995* 
 \ 3,556,639,496 
 / 28,475,674,169 
 \ 6,325,451,628 
 
 1910 
 
 
 * The upper figure is the value of the farm land, the lower one that of the buildings. 
 
 and buildings increased almost 964 per cent. Furthermore, 
 during the last decade, 1900-10, the increase in farm land 
 per se was over fifteen billion dollars, or 118 per cent. 
 
 If we turn to the conditions in Australasia, it will be 
 discovered that a similar trend of value increment exists 
 there as appears from the data given in the table on 
 page 356. 
 
 It would be possible to show the same tendency of rising 
 value for farm land in the other Australian states and 
 Canada ^ and wherever the development of the country 
 and the demand for foodstuffs is growing. 
 
 5. It may be expected that with the further extension 
 of the cultivation of the soil and with the closer settlement 
 of the country rural land will continue to rise in value in 
 new countries and ultimately in the European countries. 
 Nevertheless, it would be erroneous to assume that all 
 farm land even in the newer countries tends to rise in 
 value. The fact is that the value of farm land is subject to 
 
 ^ Statistical Abstract of the United States Census (1910), pp. 119, 121, 
 265; also Report of the Twelfth Census, vol. v. Table ix. 
 , Cf. Statistical Year Books of Canada (1904, 1910, etc.).
 
 356 
 
 THE TAXATION OF LAND VALUE 
 
 INCREASE IN THE VALUE OF RURAL LAND IN 
 AUSTRALASIA 
 
 Ywr 
 
 Unimproved value of 
 land in counties of 
 New Zealand 
 
 Unimproved value of rural 
 land in Victoria 
 
 1878 
 
 48,212,290 
 
 57,201,387 
 
 57,880,233 
 
 63,732,516 
 
 71,747,758 
 
 82,513.630 
 
 99,236,462 
 
 114,301,726 
 
 124,560,720 
 
 138,813,886 
 
 152,273,929 
 
 
 1888 
 
 
 1891 
 
 
 1897 
 
 
 1902 
 
 
 1904 
 
 77,557,628 
 
 1906 
 
 81,198,431 
 
 1908 
 
 91,025,874 
 
 1910 
 
 100,646,814 
 
 1912 
 
 106,752,622 
 
 1913 
 
 109 512.311 
 
 
 
 great fluctuation. In many parts of the United States, for 
 example, much country land has become impoverished and 
 abandoned. This impoverishment has been greatest in our 
 south central states, except Alabama, Kentucky, and Ten- 
 nessee. There has also been considerable impoverishment 
 and retardation in the southeastern states, especially in 
 West Virginia and Georgia; also in North Dakota, Ne- 
 braska, and Kansas land values have depreciated when 
 cultivation of the soil had to be abandoned. West of the 
 Mississippi four states reported a considerable reduction 
 in productivity. The total area of counties comprising im- 
 poverished land has been estimated as 307,730 square 
 miles or 10.3 per cent of the total land area of the United 
 States.^ Moreover, 16,597 square miles, 0,6 per cent of the 
 total area, have been abandoned. Half of this abandoned 
 land is in southeastern United States.^ Temporary fluc- 
 
 ^ New Zealand Official Year Book (1913), p. 860; Victorian Year Book 
 (1911-12). p. 223. Cf. also, Mulhall, Dictionary of Statistics (1911), p. 
 367. 
 
 * Report of the National Conservation Commission (1909), vol. i, p. 77. 
 
 ' Ibid., p. 78. It is not generally known that the oft-mentioned aban-
 
 THE TAX AS A SOCIAL REFORM 357 
 
 tuations frequently occur with the extension of production 
 to our western prairie regions as well as with the exhaiis- 
 tion of the soil. Again, considered for short periods of 
 time, through the introduction of improvements in the 
 methods of cultivation and the substitution of intensive for 
 extensive production nu-al land values are very often 
 affected.^ 
 
 Similarly, fluctuations are frequent in Australasia and 
 Canada. Speculation in these countries has been and con- 
 tinues to be rampant, leading to "land booms" or to in- 
 ordinate appreciation in land value, which later result in 
 precipitate depressions. An illustration from Ontario, 
 Canada, will make this tendency of rural land value to 
 fluctuate more apparent. Consequent upon the opening 
 up of Manitoba, the value of farm land experienced a de- 
 clme in Ontario from $625,478,706 in 1884 to $587,246,117 
 in 1894.2 
 
 To conclude: (1) The extension of distant sources of 
 grain supply due to the improvement of transportation 
 facilities, along with social causes, e.g., dissatisfaction with 
 rural Hfe, changed conditions of labor, etc., has been the 
 cause of the agricultural depressions and of the dechne of 
 rural land value in European countries. (2) In the new 
 world, the extension of production, so detrimental to 
 European agriculture, has not only been a boon to the 
 farmers, but is also the cause of the appreciation in the 
 value of rural land of the country as a whole. (3) The gen- 
 eral upward trend of values is, however, not universal 
 throughout the more newly opened countries, nor is the 
 rise in value uniform. In many states and sections of the 
 country, the value of rural land is subject to great fluctua- 
 tion; in others the value remains constant. (4) Although, 
 
 doned farms common in New England have been largely reoccupied and 
 rendered productive recently by Italian and French-Canadian farmers. 
 ilbid.) 
 
 1 Cf. Fairchild, Rural Wealth and Welfare, pp. 300/. 
 
 Statistical Year Book of Canada (1895), p. 303.
 
 358 THE TAXATION OF LAND VALUE 
 
 as free land is taken up and cultivated, as intensive super- 
 sedes extensive cultivation, and as the population in- 
 creases, agricultural land will tend to appreciate in value; 
 for a long time to come, we may expect to find constant 
 values and decrements, more often than increments, charac- 
 teristic of rural land. 
 
 6. The problem of determining the trend of land value 
 in urban communities presents serious diflficulties. The 
 rise and growth of cities in the nineteenth century have 
 been phenomenal and unprecedented in the history of the 
 world. And it is generally held that the movement of con- 
 centration of the population in cities will tend to continue.^ 
 Cities, however, do not always progress in the same way, 
 nor to the same degree, the growth of some being far more 
 rapid than that of others. Their relative growth depends 
 upon such factors as differences in wealth, in the character 
 of the industries undertaken, in the number of population, 
 in topography, in transportation facilities, in climate, in 
 the platting system, and so forth.^ All these factors in 
 urban growth likewise exercise an influence on the value of 
 the land. The value of urban land, indeed, is affected and 
 disturbed even by changes in the current rate of interest 
 (the capitalization rate for realty varies with the character 
 and use of the building and neighborhood, etc.), and by any 
 judicial decisions affecting property rights. Other influences 
 that are apt to depreciate land value are public or quasi- 
 public structures, as, for example, the elevated roads and 
 other so-called "nuisances." In studying the data pre- 
 sented below, therefore, showing the general movement of 
 values, it must not be overlooked that even in the most de- 
 veloped cities there are districts markedly retrogressive 
 and deteriorated. 
 
 The value of urban land is, of course, attributable to the 
 
 * Cf. Weber, Growth of Cities in the Nineteenth Century, in Columhia 
 Univ. Studies, vol. xi, chap. ix. 
 
 * Hurd, " Distribution of Land Values," in Yale Review, vol. xi, p. 144.
 
 THE TAX AS A SOCIAL REFORM 
 
 359 
 
 fact that land is needed for residence and business purposes 
 and that the number of more desirable sites is limited. It 
 may therefore be laid down as a general principle that in 
 all countries, wherever the concentration of population 
 and progress are in evidence, the value of land will tend to 
 rise. Not to illustrate any abnormal growth in value, but 
 to show the general trend and to emphasize the extraor- 
 dinary character of the increase especially in the larger 
 cities, the following statistics are presented. 
 
 In New York City the assessed value of real estate has 
 increased as follows: ^ 
 
 Year 
 
 1898 
 1900 
 1902 
 1904 
 1906 
 1908 
 1910 
 1912 
 1913 
 1914 
 1915 
 
 Total real estate 
 
 $1,856,567,923 
 8,168,557,700 
 3,332,647,579 
 5,015,463,779 
 5,738,487,245 
 6,722,415,789 
 7,044,192,674 
 7,861,898,890 
 8,006,647,861 
 8,049,859,912 
 8,108,760,787 
 
 Land 
 
 $3,367, 
 3,843, 
 4,001, 
 4,563, 
 4,590, 
 4,602, 
 4,643, 
 
 233,746 
 165,597 
 129,651 
 357,514 
 ,892,350 
 852,107 
 414,776 
 
 Improvements 
 
 $1,959, 
 2,298, 
 2,490, 
 2,716, 
 2,796, 
 2,855, 
 2.884, 
 
 179,364 
 334,522 
 206,348 
 222,137 
 344,754 
 932,518 
 475,851 
 
 In considering the above figures, it must be noted that 
 the assessed value of the land here given does not include 
 the value of the land owned by corporations, which is, how- 
 ever, included in the total value of the real estate; and that 
 until a few years ago the assessment was much below the 
 actual value, in some cases as much as thirty per cent be- 
 low. Since 1906 the per capita value of the land itself has 
 fluctuated from between eight and nine hundred dollars. 
 
 * Report of Tax Commissioners of New York City (1915), pp. 20-21, 71. 
 The discrepancy in the figures between the separate and combined values 
 of real estate is accounted for by the separate classification of the real 
 estate owned by corporations and special franchises which are included 
 in the total value of real estate.
 
 S60 THE TAXATION OF LAND VALUE 
 
 In 1915, the per capita value was estimated at $816. Allow- 
 ing for the incompleteness of the data, the enormous in- 
 crements in land value are, nevertheless, evident. In the 
 decade, 1898-1908, the increase in the total value of real 
 estate was nearly j^ve thousand millions of dollars, or 262 per 
 cent; since 1908, the increment has been again more than 
 one thousand millions. To take a particidar instance of the 
 enrichment of private individuals by the enormous incre- 
 ments of land value, it was estimated by the assessors that 
 the bare site on which Macy's store in New York City is 
 located was worth, in 1907, $10,000,000 per acre.^ And lest 
 this be considered an exceptional case, attention is again 
 called to the fact that for every additional member to the 
 population of New York City the value of the land is en- 
 hanced about $800.2 
 
 Similar value increments have occurred in London, 
 where it has been estimated that the increase in the value 
 of the land from 1870-90 amounted to about 7,620,000, 
 annually, and where every new inhabitant added during 
 that same period more than $400 to the value of the land.' 
 
 Or take Chicago for illustration. The financial history of 
 a quarter acre of land in Chicago, not unlike that in all 
 the larger cities, has been traced as shown in the subjoined 
 table." 
 
 The correlation of land- value increments with the growth 
 of population will be noted. In the same connection the 
 
 * First Conference on State and Local Taxation (1907), p. 401. There are 
 sites in New York valued at $40,000,000 per acre. 
 
 * "The bona fide land values of New York City exclusive of expendi- 
 tures by the owners or assessments by the city increase about $800 a year 
 for every person who has been admitted to the population." (Marsh, 
 op. cit., p. 23.) 
 
 * Weber, Ueber Bodenrente und Bodenspekulation, pp. 1S28-29. 
 
 * Eighth Biennial Report of the Illinois Bureau of Labor Statistics (1894), 
 p. 277. The enormous rise in the value of land in Chicago is even more 
 astonishing than that in New York City and London because the terri- 
 tory comprised by Chicago is much greater in proportion to population 
 than in the other two cities.
 
 THE TAX AS A SOCIAL REFORM 
 
 S61 
 
 Year 
 
 1830 
 1831 
 1832 
 1833 
 1834 
 1835 
 1840 
 1845 
 1850 
 1855 
 1860 
 1865 
 1870 
 1875 
 1880 
 1885 
 1890 
 1892 
 1894 
 
 Population of Chicago 
 
 
 Percent 
 
 
 
 Value of 
 one quar- 
 ter acre 
 
 increase 
 in value 
 
 Numbers 
 
 Increase 
 
 
 per cent 
 
 
 
 60 
 
 
 $20 
 
 
 100 
 
 100 
 
 22 
 
 io 
 
 200 
 
 100 
 
 SO 
 
 40 
 
 350 
 
 75 
 
 60 
 
 67 
 
 2,000 
 
 467 
 
 200 
 
 300 
 
 3,265 
 
 60 
 
 5,000 
 
 2400 
 
 4,470 
 
 37 
 
 1,500 
 
 
 12,088 
 
 170 
 
 6,000 
 
 233 
 
 28,269 
 
 134 
 
 17,600 
 
 250 
 
 80,023 
 
 183 
 
 40,000 
 
 129 
 
 109,000 
 
 36 
 
 28,000 
 
 
 178,900 
 
 64 
 
 45,000 
 
 61 
 
 298,977 
 
 67 
 
 120,000 
 
 167 
 
 400,000 
 
 34 
 
 92,500 
 
 
 603,298 
 
 26 
 
 130,000 
 
 40 
 
 700,000 
 
 40 
 
 275,000 
 
 111 
 
 1,098,570 
 
 57 
 
 900,000 
 
 228 
 
 1,300,000 
 
 19 
 
 1,000,000 
 
 111 
 
 1,500,000 
 
 16 
 
 1.250,000 
 
 26 
 
 Per cent 
 
 of 
 decrease 
 in value 
 
 following estimate quoted by Mr. Marsh * is impressive: 
 " In 1818 the United States gave the square mile between 
 State, Madison, Halsted, and Twelfth Streets (Chicago) 
 to the State of Illinois to be held in trust for the support of 
 the pubUc schools and the education of the children of 
 Chicago. Except for one block between Madison, Dear- 
 born, State, and Monroe Streets, nearly all of this square 
 mile was sold about seventy years ago for less than $40,000. 
 Within fifteen years after it was sold this square mile was 
 worth six million dollars. To-day its value is himdreds of 
 millions of dollars (without improvements). The rent from 
 this square mile of land would be suflficient to support for all 
 time the entire school system of the State of Ilhnois with- 
 out an additional dollar of taxation." 
 The development of Grerman cities, likewise, has been 
 
 Op. cU., p. 109.
 
 362 
 
 THE TAXATION OF LAND VALUE 
 
 and continues to be extraordinary. From agricultural 
 values about 1870, land has risen many hundred fold in 
 value as the towns grew. Examples have already been 
 given of this oft-cited phenomenon. ^ A few more must suf- 
 fice here. As in the other countries the metropolis, in this 
 case Beriin, leads and exemplifies this tendency best. 
 
 The approximate value of the area on Kurfiirstendamm, 
 the principal thoroughfare of Charlottenburg, a compara- 
 tively new portion of Berlin, is shown below: ^ 
 
 Year 
 
 VoXue in million marks 
 
 Per cent of increase 
 
 1860 
 
 1865 
 
 1870 : 
 
 1872 
 
 1885 
 
 1890 
 
 1898 
 
 0.1 
 
 1.0 
 
 2.5 
 
 6.5 
 
 14.0 
 
 30,0 
 
 50.0 
 
 100 
 
 1,000 
 
 2,500 
 
 6,500 
 
 14,000 
 
 30,000 
 
 50,000 
 
 The value of the land in Charlottenburg as a whole has also 
 appreciated enormously: ' 
 
 
 Value in million marks 
 
 Year 
 
 
 
 
 
 
 Improved 
 
 Per cent of 
 
 Unimproved 
 
 Per cent of 
 
 
 land 
 
 increase 
 
 land 
 
 increase 
 
 1865 
 
 6 
 
 
 4 
 
 
 1880 
 
 SO 
 
 400 
 
 20 
 
 400 
 
 1886 
 
 45 
 
 50 
 
 30 
 
 50 
 
 1897 
 
 300 
 
 566 
 
 100 
 
 233 
 
 From Professor Conrad's * illustrations of land-value 
 increments we quote the following: "In Frankfurt a. M 
 
 m 
 
 * Cf. chapter iv, 7. ' Mangoldt, op. cit., p. 62. 
 
 * Voigt, P., Qrundrente und Wohnungsfrage in Berlin and seinen 
 Vororten, p. 217. 
 
 * Grundriss Zum Studium der Poliiiachen Oekonomie, vol. i, p. 128.
 
 THE TAX AS A SOCIAL REFORM 
 
 363 
 
 a period of fifteen years, 1880-95, the land had appreciated 
 sixty per cent in value, while in Karlsruhe it had increased 
 from 400 to 500 per cent in a period of thirty years." 
 
 In a paper delivered before the Congres International de 
 la Propriete Fonciere, Professor Philippovich was cited as 
 authority for the case of a piece of land in Vienna whose 
 present value increment amounted to 3526 per cent of its 
 original value in 1875.^ Similar striking instances were 
 cited at this conference. For example, a certain part of 
 Paris was worth, less than a century ago, scarcely fifty 
 centimes per square metre (5000 fr. per hectare) ; this land 
 has since increased 699,900 per cent in value. "The value 
 increment of unbuilt property in the environs of Paris, 
 that is suburban land, has been estimated to have increased 
 1,793.07 per cent between the years 1851-79." 2 
 
 The general trend of urban land values is unmistakable. 
 The best proof of this is the fact that realty experts have 
 been able to formulate an approximate scale of normal 
 values per front foot like the following one,' " it being un- 
 derstood that the actual highest values in the various 
 cities vary widely from any average scale, owing to the 
 marked differences between these cities in wealth, char- 
 acter of industries . . .": 
 
 City population 
 
 Beat business 
 per front foot 
 
 Best residences, 
 per front foot 
 
 25,000 
 
 $300 to $400 
 
 600 " 800 
 
 1.200 " 1,600 
 
 1,800 " 2,400 
 
 2,400 " 3,200 
 
 3,600 " 4,800 
 
 7,200 " 9,600 
 
 23,000 " 31,000 
 
 42,000 " 66,000 
 
 $25 to $40 
 
 60,000 
 
 40 " 76 
 
 100,000 
 
 76 " 150 
 
 160,000 
 
 100 " 200 
 
 200,000 
 
 100 " 300 
 
 300,000 
 
 200 " 500 
 
 600,000 
 
 1500 " 2000 
 
 2,000,000 
 
 2000 " 3000 
 
 8,500,000 
 
 6000 " 9000 
 
 
 
 * Congrh International de la PropriSti Fonciere (1900), pp. 566-67. 
 
 * Ibid. Quotation translated from the French. 
 
 * Hurd, "Distribution of Urban Land Values," in Yale Review, vol. xi, 
 p. 144.
 
 364 THE TAXATION OF LAND VALUE 
 
 According to Lawson Purdy, the president of the tax 
 department of New York City, the annual rate of increase 
 of real property in New York City should be from four to 
 five per cent, since real property tends to increase some- 
 what faster than the annual increase in population, which 
 is about three per cent.^ 
 
 7. In spite of the facts cited to show the upward tend- 
 ency of urban land value, it must not be inferred that no 
 decrements occur. Even in the most advanced urban com- 
 munities, land does not increase in value always and every- 
 where. Some of the reasons have already been given for 
 the occurrence of depreciation in value.^ Changes in the 
 development of the city or town are apt to depress values 
 in certain districts. For example, when the utilization of 
 land either for business or residence purposes declines, the 
 value of the land likewise declines. Sometimes through 
 changes in the internal structure of the city, e.g., when the 
 residence section is superseded by industrial undertakings, 
 or when a factory and a foreign population invade a neigh- 
 borhood, values are adversely affected. Sometimes districts 
 retrograde because of encroachments of public utiUties or 
 so-called "nuisances." ' As a general rule retail property 
 tends to follow the best residence section, while wholesale 
 business replaces retail property or changes its location so 
 as to be near the wharves and railroad terminals.* 
 
 Besides decrements that reflect changes in the city's 
 development,^ urban land has often experienced a deprecia- 
 
 * Report of the Commissioners of Taxes and Assessment of the City of 
 New York (1909), p. 17; (1908), p. 7. 
 
 * Cf. supra, 6. 
 
 * The improvement of transportation facilities, moreover, such as the 
 construction of elevated roads, may cause a decline in land value by open- 
 ing up suburban land. Some public improvements such as parks in- 
 crease values generally. Cf. Real Estate Magazine, November, 1918, pp. 
 61/. 
 
 * Cf. Practical Real Estate Methods (1909), pp. 202-03. 
 
 * There are many other causes than changes in the population. The 
 New York Tax Commissioners found that the owners' failure to replace
 
 THE TAX AS A SOCIAL REFORM 865 
 
 tion in value because of a previous overvaluation. For 
 example, take the case of the quarter acre of Chicago land 
 whose changing value has been tabulated.^ Had the com- 
 plete original table in which the annual changes were traced 
 been reproduced, it would have been observed that in the 
 sixty-five years, from 1830 to 1894, decrements in its value 
 had occurred seventeen times. ^ Indeed, Chicago is an 
 illustration of fluctuating values in real estate. As a result of 
 the speculation and overcapitaHzation of land, Chicago 
 real estate is said to be valued to-day on an 1889 basis,' for 
 the expected rentals on which the value of the land was 
 then based have failed to materialize. For example, in 1851 
 certain sites on Twenty-fifth Street were valued at $250 per 
 acre; six years later the value had risen to $5000; after 
 three years it sold for $25,000; in 1862 the value fell to 
 $20,000, after which the property was improved, its value 
 rising enormously until 1900, when it sold for only one-half 
 its value twenty years earHer.* According to a real estate 
 dealer this example is typical of Chicago property. "Real 
 estate is now selling about on an 1889 basis. It reached high 
 figures in the early seventies, too high for that time, and it 
 required some fifteen or twenty years for the city to reach 
 the values fixed in 1873; but while the city was growing to 
 these values, the values themselves were falling back, so 
 that somewhere about 1885 real estate was selling at about 
 what it was worth. Another upward movement in the 
 
 their obsolete buildings with new ones resulted in lower returns and the 
 depreciation of land value. See Report of Commissioners (1913), p. 8. 
 
 * Supra, 6. 
 
 * These decrements, it is noteworthy, occurred in 1837, again in 1857, 
 again in 1873, showing the effect of the panics and hard times on the value 
 of realty. 
 
 * That is because, on account of the immense territory of Chicago and 
 on account of the easy transportation facilities, the congestion of popu- 
 lation is less imminent. This is shown by the comparative average value 
 of land quoted in the Chicago Tribune, August 26, 1913, as follows: the 
 average for Pittsburgh was $19,096; for New York City, $19,887; for 
 Chicago, only $8138. 
 
 * Chicago Red Estate News (1909), p. 186.
 
 see THE TAXATION OF LAND VALUE 
 
 early nineties carried values some ten years ahead of real 
 conditions. The city began rapidly to overtake these 
 values while the values themselves fell back to meet real 
 conditions. This process has gone on now for fifteen years. 
 Since the World's Fair a new city has been added to each 
 of the sides of the river, wealth has accumulated, public 
 improvements have been made, every token which goes to 
 make a great metropohs has come into evidence, but the 
 real estate pendulum has only begun to swing upward." ^ 
 
 In still another way are depreciations hkely to occur for 
 a shorter or longer period. Whenever the attempt to build 
 artificial towns or cities, " paper towns," fails, the result is 
 disastrous to the value of land. In Kurd's words i'^ "An 
 apparent exception to the general law of no value in the 
 site when the city starts occurs where cities are specula- 
 tively undertaken and the future is discounted, lots selling 
 at comparatively high prices in advance of utility. The 
 difference between price and value is usually demonstrated 
 before many years, the swing of the pendulum carrying 
 these lots as far below their value as prices were formerly 
 above it. Thus lots in Columbus, Ohio, which sold in 1812 
 at $200 to $300, sold in 1820 at $7 to $20, and of recent in- 
 stances there are many, such as the collapses in the early 
 history of the speculatively started towns of West Superior, 
 Wis., Tacoma, Wash., Everett, Wash., and Birmingham, 
 Ala." 
 
 8. With regard to the third class of land, namely, 
 mines and forests, the problem is of a different character. 
 We are here concerned with the problem of the conserva- 
 tion of natural resources. Mineral and forest lands are, 
 moreover, distinguished from each other by the important 
 fact that when exhausted or used up minerals cannot be 
 replaced, while forests can be cultivated provided a suf- 
 
 * Chicago Real Estate News (1909), p. 186. 
 
 ' " Distribution of Urban Land Values," in Yale Review, vol. xi, pp. 
 126-27.
 
 THE TAX AS A SOCIAL REFORM 367 
 
 ficiently long time is allowed. Nevertheless, as operated 
 to-day forests as well as mines may be regarded as wast- 
 ing assets. The United States Conservation Commission 
 estimated that at the present increasing rate of production 
 the coal supply of the United States will be near exhaustion 
 before the middle of the next century, and that the high- 
 grade iron ore will not last beyond the middle of the pres- 
 ent century; so with the known supply of petroleum in the 
 United States. "The consumption of nearly all our min- 
 eral products is increasing far more rapidly than our popu- 
 lation. In many cases the waste is increasing more rapidly 
 than the number of our people. In 1776 but a few dozen 
 pounds of iron were in use by the average family; now, 
 cm* annual consumption of high-grade ore is over 1200 
 pounds per capita. In 1812 no coal was used; now, the con- 
 sumption is over five tons and the waste nearly three tons 
 per capita.** ^ 
 
 As regards our forests there are to-day over 200,000,000 
 acres less forest land than there were originally. "We take 
 from our forests each year, not counting the loss by fire, 
 three and one haK times their yearly growth." ^ Of the 
 coimtries exporting timber, only three, Russia, Finland, 
 and Sweden, " have increased their exports to great extent 
 without encroaching on their timber capital." ' Yet, 
 in spite of the substitutes for timber for various purposes, 
 the consumption of timber has increased many fold. 
 
 In these circumstances the value of mineral and forest 
 land has enormously appreciated. And taking these lands 
 as a whole, the upward trend of values will continue as the 
 opening of inferior mines is necessitated, and as the sup- 
 ply of timber is lessened. But the exhaustion of these nat- 
 ural resources, unless a pohcy of conservation is pursued, 
 is inevitable. Moreover, as regards particular mines or 
 forests, under ordinary circumstances, when the resources 
 
 * Report of the National Conservaiion Commission (1909), vol. i, p. 16. 
 Ibid., p. 58. Ihid., vol. ii, pp. 351.
 
 368 THE TAXATION OF LAND VALUE 
 
 give out the value increments do also. Great fortunes have 
 been made through the increased value of natural resources 
 and great fortunes will continue to be thus gained, but the 
 process is limited. This class of land, then, is not only to 
 be differentiated from the other two classes; but the prob- 
 lem presented by it is also of a different character from that 
 which either the agricultural or urban land presents.^ 
 
 9. If we summarize the results concerning the three 
 kinds of land we shall answer the inquiries: First, what 
 gives land its value and its value-increment? Secondly, 
 what factors distinguish one kind of land from each of the 
 others? Thirdly, what problems does the phenomenon of 
 increments and decrements present? 
 
 Scarcity, not of land as such, but of the various grades of 
 land, depending upon the fertility, location, or richness of 
 deposit, is the cause of the value of land. Land as a non- 
 reproducible good becomes subject to monopoly price, 
 whenever the demand for a certain quality or kind exceeds 
 the supply. This demand, which is reflected in the high 
 value or value increment, is created by an ever-increasing 
 population and progress. By the latter are meant the 
 changes in mode of life, pleasures, and comfort which oc- 
 casion a proportionately greater demand for all products, 
 including urban land. Granting that the population will 
 grow and progress continue, we may assume that higher 
 values wiU follow in all three classes of land. That, how- 
 ever, is a hypothesis concerned with the remote future. At 
 present the problem is practically different for each kind 
 of land and it is with the present conditions that we are 
 here concerned. 
 
 To-day, in the case of agricultural land, the fact that 
 decrements in value prevail in the older countries shows 
 that there exists no world scarcity of farm land below a 
 
 ^ In essence there is less difference between agricultural land and for- 
 ests, for example. Both need to be conserved. In the present era, however, 
 the problem of conservation is not the same for both.
 
 THE TAX AS A SOCIAL REFORM 369 
 
 certain grade. And the fact that in new countries agricul- 
 tural land tends to appreciate in value in some sections, 
 but to depreciate in others, shows exceptionally favorable 
 conditions of the soil which render the competition with 
 foreign countries and with other parts of the same coun- 
 try profitable. Here, then, there is no problem of discrim- 
 inatory legislation to divert to the cofTers of the state the 
 excessive profit accruing from the rise in the value of land. 
 On the contrary, the government may find it expedient to 
 promote the profit of the farm owners in the interest of 
 greater and cheaper production. 
 
 With regard to urban land, on the other hand, the prob- 
 lem of monopoly value becomes more acute. Every person 
 added to the urban population affects the value of the land 
 more or less. The tendency of urban land value to appre- 
 ciate is unmistakable. The result is that the owners of this 
 commodity, land, reap the ever-increasing profit at the 
 expense of the consumers, the tenants. The first problem, 
 therefore, is that of the distribution of the value increment 
 of the land. But the universal need on the one hand, and 
 the scarcity of the commodity on the other, raises a second 
 question, namely, does the present system of land tenure 
 insm*e the best utilization of the land; since apy misuse of 
 the land by self-seeking individuals affects the social well- 
 being. The evils charged to the present system of tenure I ^^ 
 are briefly: (1) speculation in land; (2) the so-called housing^J--''''''**^ 
 problem; (3) the misuse of natural resources. I 
 
 y'^^^The charges against speculation in land are that it fosters I 
 V the monopolization of an indispensable commodity; that j 
 y it artificially screws up the value of land; that it enriches 
 / one class at the expense of society in general. It is claimed 
 I that in cities a great deal of ripe building land is kept out 
 S of use by speculators who wait to pocket the profits arising 
 from the appreciation in value. In this way they control 
 or affect the supply Hke other monopolists, and through 
 this practice rent in urban communities is unnecessarily
 
 THE TAXATION OF LAND VALUE 
 
 exorbitant. As a further result, it is contended, the masses, 
 upon whom the expenditure of rent falls most heavily as 
 compared with the wealthier classes, are compelled either to 
 resort to poorer dwellings, in the unsanitary and congested 
 districts, or to give up a greater proportion of their income 
 for rent, leaving other urgent wants unsatisfied. It is 
 further charged that the private appropriation of land 
 value breeds and perpetuates an idle class who contribute 
 nothing to the improvement of the land or to social well- 
 being. Such are the criticisms and problems which the 
 phenomenon of urban land-value increments awakens. 
 
 As for mines and forests where speculation is also ram- 
 pant, it is not so much the matter of distribution of the 
 value, as the matter of conserving the natural resources, 
 which calls for solution. Yet, it must not be overlooked 
 that in this country, at any rate, the mineral and forest 
 wealth is in the possession of a comparatively small group 
 of persons, who practically control the prices of the nat- 
 ural products. The recent protests of the governments 
 against the wasteful management of the natural resources 
 which is a menace to social welfare is proof of the necessity 
 for reform. As regards this class of land, therefore, the 
 most expedient use of the resources must be considered. 
 
 All the above-mentioned problems fundamentally in- 
 volve the expediency of private land ownership. Before, 
 however, the latter is even considered, certainly before 
 any conclusions can be reached, it is necessary to raise the 
 questions: How rampant is speculation in land? What 
 evils does it create? What are the extent and effect of bad 
 housing? It is to the examination of these conditions that 
 we now turn. 
 
 10. That speculation in land exists needs no elaborate 
 proof. The value of land is subject to change, and the es- 
 sence of speculation in any commodity consists in the anti- 
 cipated fluctuations in its value. Yet there is a marked 
 distinction between the speculation in land and that in
 
 THE TAX AS A SOCIAL REFORM S71 
 
 other commodities which deserves mention. We note that 
 practically no real estate stock is sold on the stock ex- 
 change in this country/ and that no dealings in realty on 
 the other exchanges occur.'^ The explanation for this lies in 
 the peculiarity of land speculation, namely, that no short 
 selling in land occurs. Land speculation is always " bul- 
 lish." 3 
 
 The fact seems to be that of all investments real estate 
 is considered the safest and as yielding the most permanent 
 income. " Nothing is more solid and permanent, more en- 
 during in its nature and steadier in its value during cycles 
 of time. Land cannot be destroyed, burned up, carried 
 away by thieves, worn out or lost, nor can its real value be 
 * watered* by exploiters and impaired by the peculations 
 and speculations of dishonest bank or corporation offi- 
 cials." ..." It has been proved that the element of gamble 
 in realty is less than in any other venture. Life itself is not 
 so certain. ..." * It is said that no commodity is so little 
 affected in value during depressions as land. Some one has 
 described the cycle of speculation somewhat as follows: 
 At the beginning of a "boom" period there is but slight 
 demand for real estate; at such times even realty dealers 
 
 * In New York, for example, the stock of only one real estate company 
 is listed on the Stock Exchange. Cf. Practical Real Estate Methods, p. 273. 
 
 * So, too, guaranteed real estate mortgages are not attractive to 
 speculators. Real Estate Magazine, October, 1912, p. 55. 
 
 * Dr. Eberstadt calls attention to this fact as follows: " Speculation in 
 land is one-sided speculation; it differs decidedly from other kinds of 
 speculation, such as, for example, speculation in stocks and grain. In the 
 latter, the bids are up and down ('long' and 'short'), and in such trans- 
 actions two parties try synchronously to further their diametrically op- ^ 
 posed interests. In land, on the contrary, no one can speculate 'short';' 
 without exception speculation tends to bring about a rise in price. Irre- 
 spective of the ownership, speculative land values are always ' bullish.' 
 By this very fact speculation in land assumes a singular position as com- 
 pared with all other objects of speculation." Translated from Die SpelcU' 
 laiion im neuzeitlichen Stddtebau, pp. 30-31. 
 
 * By an enthusiastic realty dealer. SeeChic&go Real Estate News (1909), 
 p. 186; also Kirkman, " Real Estate," in Biuinets, Commerce and Finance 
 (1910), p. 819.
 
 S7 THE TAXATION OF LAND VALUE 
 
 turn to the stock market. Everybody invests in personal 
 property. Then the demand for realty improves, and so 
 does its value. Although real property is the last thing to 
 be affected, the speculative mania does finally set in, 
 screwing up the value of land. The result is an overvalua- 
 tion of property that cannot last long. As some one put it, 
 "after real estate speculation comes the deluge." ^ It is 
 these "fictitious" values that when the panic sets in need 
 readjustment for the most part.'^ Aside from this element of 
 safety and aside from the "bullish" character of the specu- 
 lation in land, the fact that real estate security constitutes 
 poor collateral for banks, makes this class of property a 
 less attractive commodity for exchange speculation. Thus 
 speculation in land must be placed in a class by itself.* 
 
 11. Since the essence of speculation is to buy cheap and 
 sell dear, we find the best examples of land speculation in 
 new settlements where there is an abundance of free land, 
 e.g., in the United States when first settled, the Austral- 
 asian colonies, or western Canada. With the extended 
 use of minerals in industry, mines formed an especially 
 fertile field for speculators. And as urban communities as- 
 sumed greater and greater importance, a fmlher field was 
 opened up for speculative operations. So long as free and 
 cheap land existed, the speculator was generally an indi- 
 vidual. All he had to do was to invest in a piece of land in 
 
 1 Carney, How to Buy and Sell Real Estate at a Profit, pp. 202, 207. 
 
 * While stocks fell during 1907 more than half in value, real estate values 
 were said to have depreciated very little and there were fewer foreclosures 
 than in normal times. Practical Real Estate Methods, pp. 232-33. 
 
 * This anomalous character of the real estate market explains what to 
 Mr. Cederstrom (cf. Unjust Taxation) seems irreconcilable, namely, the 
 continued increase of real estate assessments in New York City diu-ing a 
 time of a depressed market for real estate. The fact that p>eople prefer 
 some other investments to real property by no means signifies that real 
 property has fallen in value. There is no overproduction or oversupply 
 as in case of reproducible and perishable commodities. While the market 
 activity, no doubt, in the case of real estate also, is an index to general 
 values, yet the actual, stable value of land will rise without a market, pro- 
 vided the demand for dwellings and raw materials continues to rise.
 
 THE TAX AS A SOCIAL REFORM 875 
 
 a district which he expected to develop, sit down and wait 
 until the anticipated value was realized. For example, 
 lots in the Bronx, New York, which sold in the eighties for 
 $200 are now valued at $16,000 to $18,000 apiece. One 
 who at that time invested $60 or $65, if he retained posses- 
 sion, can now sell the land for $6500 to $7000.^ The returns, 
 to be sure, were not immediate, but one of the cardinal 
 traits of the land speculator is patience. Here is an actual 
 illustration of a speculative transaction: In 1853 Morris 
 sold to Nimphius a parcel of land, 150 feet front, for $300; 
 in 1895 two lots of the parcel were sold for $9500. The fol- 
 lowing year the owner received from the city for exercising 
 its right of eminent domain, for 9 feet, $40,000. In 1900 
 he received $70,000 for the balance of the land, making on 
 his outlay of $300, $119,500, be^des the usufruct of the 
 property for fifty years. ^ Another person similarly reaUzed, 
 on an investment of $8000, $295,000 plus the rent of 
 $4000 to $5000 annually. In this connection it may be 
 pointed out that many of the milUonaires owe their vast 
 fortunes in part to land-value appreciations. The Astor 
 fortune of $450,000,000 is a standard example. Accord- 
 ing to one writer ' eighty-nine per cent of the million- 
 aires started with real estate investments, and sixty per 
 cent continue to invest in it largely. 
 
 But land speculation is no longer the same as it was even 
 a generation ago. Of coiu*se, to this day, let the building of 
 a railroad or a subway be contemplated and the surround- 
 ing ground becomes appropriated, to be sold at a profit in 
 the future. Or, let a new mine be discovered, and not only 
 the mine but the country round about is soon in the hands 
 of promoters or speculators. " Long Island's waste land," 
 quotes Marsh,* "is much of it held now by speculators 
 
 Practical Real Estate Methods, p. 349. Ibid., p. 354. 
 
 Real Estate News (1909), p. 186. Quoted from Cincinnati Real Estate 
 Bulletin. 
 ^ * Op. cU., p. 70.
 
 S74 THE TAXATION OF LAND VALUE 
 
 who, paying no taxes to speak of and undoubtedly in many 
 cases none at all, can afford to wait for the natural rise. . . .** 
 In Brooklyn, where a subway is waiting construction, 
 20,000 lots, assessed at a value of $15,000,000, are in the 
 hands of speculators, who are waiting for the value incre- 
 ments.^ Speculation in suburban and vacant land to-day, 
 however, is mainly in the hands of realty dealers or of " de- 
 velopment" companies. Land speculation, according to 
 realty men themselves, is a profession, the four requisites 
 of the speculator being time, capital, courage and judg- 
 ment.2 "The real estate operator at one time was a drone 
 in the community. He was really a real estate speculator, 
 would buy and sell at a profit, but would do nothing him- 
 self to create increased value. To-day realty operating is 
 a profession, and the speculative side is very unimportant." 
 That is, the real estate operator must be familiar with the 
 market situation, with the economic conditions which in- 
 fluence values, and he must recognize, too, the social forces 
 which tend to build up the community. 
 
 In this country, speculators in land are in the main 
 individuals, while realty corporations are comparatively 
 few; ' in Germany, on the contrary, the latter are said to 
 control realty operations. In the German cities, especially 
 in Berlin, professional realty speculation is said to flourish 
 as nowhere else. These corporations resemble the so-called 
 "development" companies of this country in that build- 
 ing forms part of their operations. It is claimed that 
 the seventy-three or more " Terraingesellschaf ten " have 
 practically controlled building operations in Berlin and its 
 suburbs. In fact the magnificent apartment houses of un- 
 
 Marsh, op. cit., pp. 108-09. " It is stated that withm five years after 
 the completion of the Market Street subway-elevated road in Philadel- 
 phia the assessed valuation of the property within its sphere of influence 
 increased in value by $130,000,000. The cost of the subway was in the 
 neighborhood of $20,000,000." Real Estate Magazine. July, 1913, p. 84. 
 
 Practical Real Estate Methods, p. 235. 
 
 In Illinois realty corporations are forbidden by law.
 
 THE TAX AS A SOCIAL REFORM 375 
 
 iform size and structure in and around Berlin are attrib- 
 uted to the activity of these speculators. The extent and 
 character of these operations is shown in the following 
 statement by an American realty agent: * "I have great 
 respect for the magnitude of our realty operations in New 
 York, but Berlin can make us sit up and take notice when 
 it comes to buying undeveloped suburban land and taking 
 chances. Imagine a seventeen-million dollar deal in vacant 
 lots in New York. Recently a part of the Tempelhof 
 Parade Ground was bought by a syndicate from the gov- 
 ernment for 72,000,000 Marks." Then he tells how the 
 Schoenberg apartment-house quarter was founded by the 
 President of the Berlin Realty Company, which has paid 
 one hundred per cent dividends annually for years. The 
 president formed a syndicate and bought the site which 
 ten years ago had been farm land. " It took him several 
 years to get control of what he wanted and he then 
 started to lay out model streets on curved lines." This 
 land was afterwards sold to building contractors, but the 
 realty company retained control of the architectural de- 
 signs. In this manner some sections of Charlottenburg, 
 Grlinewald, and other suburbs were foimded.^ 
 
 12. From the social standpoint it is questionable 
 whether this changed character of land speculation is an 
 improvement. To-day the professional land speculator 
 and the building operator are generally combined in the 
 same person. Or they form a corporation. The methods of 
 operation vary. In some cases the speculator borrows 
 money with the land as security to finance the building. 
 Or he may arrange with the building contractor for the 
 construction of the building, and thus undertake opera- 
 tions involving hundreds of thousands of dollars with only 
 a small sum of his own. In many cases speculators have 
 manipulated deals so as to get both the value of the lot 
 
 Chicago Real Estate News, (1911) p. 169. 
 
 * See Voigt, Grundrente und Wohnungafrage in Berliiit pp. 218^. .
 
 876 THE TAXATION OF LAND VALUE 
 
 and house, the latter costing him practically nothing. This 
 is said to be a common practice in New York State 
 where he can exploit the workmen, because in New York 
 State the mechanic's Uen does not take precedence over 
 a mortgage claim except when such a claim is recorded 
 prior to the recording of the mortgage.^ 
 
 In fact, between the speculator, the loan association and 
 the building contractor, many kinds of frauds and socially 
 disadvantageous operations are perpetrated. For example, 
 some cheaply built, ill-equipped houses are often erected, 
 advertised, and sold to workingmen for the most part at a 
 price exceeding enormously the actual value of the property. 
 Nor is this all ; in most cases the terms of sale are so manip- 
 ulated that after a failm-e to pay interest on the mortgage, 
 the property reverts to the sp)eculator, who repeats the 
 deal, exploiting one person after another. 
 
 Through cooperation with building-loan associations 
 enormous sums of capital are put at the command of land 
 speculators, which must facilitate their control of the com- 
 munity's housing. WTiole towns have been established, 
 streets laid out and houses built by such operators, who reap 
 enormous profits through the growth of settlements and 
 of industry. A recent illustration is Gary, Indiana.^ It is 
 claimed, of course, that these land promoters, by develop- 
 ing the subiu-bs and erecting houses, are benefactors to the 
 city population in relieving the congestion of the cities. 
 This to a certain degree must be admitted. Nevertheless, 
 when the importance of the commodities they deal in, i.e., 
 land and houses, are considered, the expediency of putting 
 the welfare of the community into the hands of money- 
 making corporations may well be questioned. 
 
 ^ Practical Real Estate Methods, p. 217. This has been declared, by 
 the decision rendered in AUis-Chalmers Co. vs. Central Trust Co. (190 
 Fed. Rep. 700), to hold everywhere. 
 
 * The Gary Land Company, the real estate department of the United 
 States Steel Corporation, is described as the largest real estate corpora- 
 tion in the world. See Chicago Real Estate News, August, 1912, p. 141.
 
 THE TAX AS A SOCIAL REFORM 877 
 
 One kind of operation, for example, undertaken by the 
 above-mentioned cooperative speculators and financed by 
 banking or other loan associations, is the erection of the 
 magnificent apartment houses in suburban districts. The 
 timehness, that is, the need for these is in question. Ac- 
 cording to some realty authorities these operations in New 
 York City (the upper part of the city) have been losing 
 ventures because untimely. In Germany the erection of 
 these tenements or " Mietkasernen " has given rise to a 
 great deal of controversy as to their social value. ^ The 
 enormously rapid growth of speculative building operations 
 in communities scarcely iu*ban has been pointed out by 
 Professor Eberstadt as a social evil. Quoting from a work 
 entitled, " Viel Hauser und Kein Heim," he illustrates his 
 theory that besides its untimeliness, speculative building 
 drives up rather than reduces rents. ^ In the city of Cassel, 
 according to him, a wealthy man bought up some land 
 which would have yielded a good profit at twenty-five 
 marks per square metre, if three-story hoases with gardens 
 had been erected thereon. But the landowner had tall 
 tenements put up to yield him a rental from fifty to seventy- 
 five marks per square metre. This resulted in higher rents 
 to the tenants; but because of the oversupply of apart- 
 ments, many of which remained vacant, the income of the 
 landlord was no higher than if the three-story houses had 
 been built. This violation of the law of supply and demand 
 is illustrated also by the facts in om* cities where, in spite of 
 the imsatisfied demand for better dwellings, many apart- 
 ments stay vacant indefinitely. A significant example of 
 this is furnished by St. Louis. A few years ago it was esti- 
 
 * The chief contestants have been Dr. R. Eberstadt who holds that 
 the "tenements" are socially injurious as well as the cause of high rent, 
 and Dr. Andreas Voigt, who has defended the erection of these buildings 
 in Kleinhaus und Mietkaseme. 
 
 Brentano asks: " Woher kommt jene Teuerung der Wohnungen, die 
 sich gerade in den 90*' Jahren in steigendem Masse fiihlbar gemacht hat? 
 Die Antwort lautet: Es ist die Folge der Wohlorganizierten Terrain- 
 gpekulation." Cf. Soziale Zeitfragen (1904), vol. xvii, p. 7. 
 
 * Eberstadt, Die Spekulation im neuzeitlichen Stadiebau, p. 15. -
 
 378 THE TAXATION OF LAND VALUE 
 
 / 
 
 mated that about 11,000 houses and flats in St. Louis, ex- 
 / elusive of stores and oflBces, were vacant. Nevertheless, 
 rents were said to have been higher there than in Chicago.* 
 The reason is probably, as in the instance cited from Eber- 
 stadt, that it is to the advantage of the owner who is a 
 speculator ^ to keep the houses vacant rather than to reduce 
 the rent, for by reducing the rent the market or capitalized 
 value of his property is depreciated. 
 1 l/^ 13. A graver charge even than those discussed above is 
 f f that m urban communities land is kept from its best utili- 
 * ^ ' zation by owners whose chief interest Ues in the value in- 
 t crement which the property will in time realize. That the 
 
 withholding from market and from improvement of land 
 ; situated in the heart of a populous city causes unnecessary 
 I enhancement of rent is logical. The question is whether 
 I there actually are so many such undeveloped sites ripe for 
 I building as to cause concern to the community. Full data 
 I regarding this point are lacking. Upon an examination of 
 { the assessment roll of the downtown section of Chicago 
 I the central business property from the river to Sixteenth 
 \ Street and the river to Lake Michigan ' not counting 
 i the property owned and occupied by the raihoads, nearly 
 ; one hundred vacant lots with from twenty-five to two 
 / hundred feet frontage each were enumerated by the writer. 
 / The number of frame buildings, moreover, of trifling value 
 ( was considerable, although most of these deteriorated 
 I structures were on the outskirts rather than in the center 
 I of this section. But taking Chicago as a whole, the propor- 
 tion of vacant lots would undoubtedly be much greater 
 than in the business center. 
 
 Valuable data in regard to vacant land in New York City 
 are reproduced in the following table: * 
 
 Chicago Real Estate News (1909), p. 136. 
 
 * There are few urban or other landowners who are not speculators, 
 i.e., who do not anticipate an increase in the value of their property. 
 
 * See Assessed Value of Property in Chicago, compiled by Chicago Real 
 Estate Index Company, issue 1908-12. 
 
 * Report of Commissioners of Taxes . . . of New York City (1913), p. 67. 
 
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 380 THE TAXATION OF LAND VALUE 
 
 With reference to the above table it is evident that there 
 are relatively fewer vacant lots in Manhattan than in 
 the other boroughs. In Manhattan, where property is so 
 enormously high, rents so excessive, and the tax rate on 
 improved and unimproved land alike so heavy, it is less 
 profitable to keep land vacant than in Queens, where 62.5 
 per cent is unimproved.^ The demand for dwellings is also 
 less in the latter borough; perhaps much of the land is not 
 yet ripe for building purposes in Queens. Nevertheless, 
 the enormous value of this vacant land, over 142 million 
 dollars in Queens alone, is significant. When it is considered 
 that in all the boroughs about 645 millions represent specu- 
 lative values, since the vacant property does not yield any 
 annual income, the problem as to the regulation of private 
 ownership of land in New York City is seen to be a serious 
 one.^ Moreover, the number of vacant parcels enumerated 
 by the tax assessors does not include land with deteriorated 
 and almost valueless improvements upon it.^ 
 
 During the Lloyd George Budget agitation, the discus- 
 sions with regard to imdeveloped land revealed the condi- 
 tions in Great Britain. For example, it was said that one- 
 fifth of the land within the boundaries of the County of 
 London lay vacant; that in Edinburgh 2000 acres of un- 
 
 ^ According to the report of the tax commissioners, vacant parcels were 
 frequently acreage plots in the suburbs, so that the actual area vacant is 
 greater than indicated in the table. See Report (1913), p. 64. 
 
 * The serious consequences of keeping land out of use and underde- 
 veloped is recognized by the President of the Allied Real Estate Interests, 
 Allan Robinson, as appears from the following exhortation to the ' real 
 estate ground hog': "But the owner of underimproved property has a 
 responsibility to the community in the same way that the owner of un- 
 improved has. . . . Inertia and hoggishness on the part of real estate 
 owners underlie the Single Tax menace. . . With the removal of the 
 causes which have brought about the Single Tax agitation and a changed 
 point of view on the part of real estate owners and brokers as to the duties 
 of land ownership, the Socialistic campaign aimed against real estate will 
 die of its own weight." {Reed Estate Magazine, October, 1913, p. 63.) 
 
 * " Every parcel which contains any improvement, however slight, is 
 counted as improved." Report of Commissioners of Taxes of New York 
 City (1913), p. 64..
 
 THE TAX AS A SOCIAL REFORM 381 
 
 used land excluding parks and gardens were kept unused, 
 " until a clear feu-duty of 160 per acre per annum can be 
 obtained." ^ It was estimated in 1892 that in Manchester 
 the total area of vacant land (excluding gardens, roads, 
 and other land unsuitable for building purposes) was 4200 
 acres. In Birmingham, out of 13,477 acres, 3500 were un- 
 built upon. It was shown that in Bradford the density in 
 some sections was 301 persons to the acre, although the 
 average density was only 21; and that of 10,776 acres of 
 the land in that city, 4512 acres available for building were 
 still vacant. Indeed, two-fifths of the entire population of 
 England and Wales, it is claimed, are crowded on about 
 one eight-hundredth part of the total area of the country, 
 another two-fifths occupy a little more than one two- 
 hundred-and-fiftieth part, and the remainder are scattered 
 over the rest of the land. 
 
 There is, however, more reason for the withholding of 
 land from use in European countries than in the United 
 States. In England unimproved land is not taxable imder 
 the rating system, and the land is largely inherited. In this 
 country, to hold vacant or undeveloped land involves the 
 payment of taxes and special assessments as well as the 
 foregoing for a long time of the return on the capital in- 
 vested. Real estate authorities confirm this opinion. 
 " Where assessed valuation and taxes are both high, there 
 is no money to be made in holding vacant land for an in- 
 definite period. Every lot which is worth say $3000 and 
 which is unimproved has annual charges against it of at 
 least $200, not to speak of assessments. This charge is so 
 heavy that it usually counterbalances the increase in value. 
 Money made in vacant land accrues to purchasers who are 
 shrewd or lucky enough to buy at just the right moment, 
 
 ' Chomley and Outhwaite, Land Values Taxation in Theory and Prac- 
 tice, pp. 73 Jf. In the Town Council it was said that Edinburgh contained 
 8000 acres rated at agricultural value. Cf. The Budget, the Land and the 
 People (1909), pp. 68/.
 
 882 THE TAXATION OF LAND VALUE 
 
 and who capture a quick profit." ^ Or, as another one puts 
 it: * "Unless a lot doubles in value every five years, its 
 value will not keep pace with taxes, special assessments and 
 interest." In cities, therefore, as in New York, where an 
 earnest attempt is made to assess landed property at its 
 full value and where the tax rate is considerable, specula- 
 tion in vacant land is probably less prevalent than in other 
 cities. Nor must it be thought that such speculation is 
 always profitable.' Concerning vacant land that bears an 
 urban value, so much may be said in conclusion : either the 
 land is not yet ripe for building, or if ripe for building it is 
 deUberately withheld from utili25ation. In both cases the 
 purpose is speculative, but it is only in the latter that the 
 practice is reprehensible. And yet the following considera- 
 tion deserves attention. In a large, congested city, where 
 land values are high but stable,^ and taxes high, the ordi- 
 nary investor will more likely find it profitable to build 
 upon his land, if only to cover its annual cost. This holds 
 true even of the land owned by the thirteen milhonaire 
 families quoted as the landed monop>olists of Manhattan. 
 For of the 205 or more millions of land value owned by 
 them, less than ten miUions comprise vacant land.^ To be 
 sure this does not take into account the underdeveloped 
 land held by them. 
 
 14. Another evil which speculation in land is known to 
 foster concerns the investor. Of course it will be said that 
 speculation of any kind is a game in which the investor 
 
 Chicago Real Estate News, April, 1912, p. 53. 
 
 ' Reed, Science of Real Estate and Mortgage Investment, p. 77. See 
 also Practical Real Estate Methods, p. 242. 
 
 ' " They do not hear of the thousands of unsuccessful prospectors or 
 the many thousand proprietors of vacant property who wait for years 
 for an improvement in values and finally see their profits disappear in 
 interest charges and taxes." Real Estate and Builders' Guide, March 16, 
 1912, p. 540. 
 
 * Not constant, but in the sense of steadily increasing. 
 
 * From a statement by the Society to Lower Rents and Reduce Taxes 
 on Homes.
 
 THE TAX AS A SOCIAL REFORM 383 
 
 consciously takes a risk, and must bear his losses. In land 
 speculation, however, it is not a mistaken judgment in the 
 investment so much as the system of mortgage which most 
 often ruins him. The heavy indebtedness incurred by the 
 purchaser results often in foreclosure, by which the mort- 
 gagee profits by more than the value of the mortgage. 
 According to Professor Eberstadt,^ six and one-half thou- 
 sand million of the seven and one-half thousand million 
 marks, the estimated value of the occupied land in Greater 
 Berlin, were mortgaged. The general phenomenon of in- 
 debtedness and land speculation is described as follows by 
 Professor Adolf Wagner: ^ "The factors which enter into 
 this tendency are the fluctuations in the current rate of 
 interest and of the rent. With the fall in the rate of interest 
 and with the increase in rent, the capitalized value of land 
 tends to rise. This induces the people, even with borrowed 
 money, to invest in land. If the market price continues to 
 rise as expected, the reahzation of profits is sought by con- 
 tinuing the sales, and this by means of more borrowed capi- 
 tal. The gratifying terms of credit which the banks offer at 
 such times only draw more men on to such transactions. 
 Then the market value changes, a higher rate of interest 
 ensues, and, in consequence of the improved transportation 
 facilities, the rent falls, tending further to decrease land 
 values. The value of the land no longer covers the capital 
 invested, there ensues a crisis in real estate, and mortgages 
 falling due, the land is sold at auction, and once more the 
 moneyed interests profit from the transactions." Occur- 
 rences of enormous gains in this country which have ac- 
 crued to individuals as a result of such foreclosures could 
 be readily cited. One example must here suffice. Mr. Hurd ' 
 tells of a piece of land 89 feet by 99 feet in Denver, Colo., 
 
 ^ Op. cit, pp. 54, 207. Land speculators are called by him " Prekaristen, 
 die von der Gnade unserer Institutionen leben." 
 
 * Grundlegung der Politischen Oekonomie (1894), Pt. II, p. 389. (Trans- 
 lated freely from the German.) 
 
 * Principles of City Land Values, p. 131.
 
 884 THE TAXATION OF LAND VALUE 
 
 which had been bought on a tax title many years ago for 
 $500. In 1890 it was leased for $14,000 annual net ground 
 rent for a period of ninety-nine years. That made the land 
 value $280,000 capitalized at five per cent. Every front 
 foot of ground was thus worth $3150. A nine-story building 
 was erected upon it in 1890 costing $325,000. In 1894 the 
 net rents were about $17,500. The leasehold was mort- 
 gaged for about $75,000, and when the rent dropped, the 
 building was surrendered to the mortgagee and then to 
 the ground-owner, who thus acquired the building and the 
 land, worth together $330,000, for an original outlay of $500. 
 
 Such losses, however, are attributable to miscalculations 
 and short-sightedness such as appear in all speculation. 
 Speculation in land cannot be condemned on account of 
 this evil alone. And yet, when, as in Germany, mortgage 
 mdebtedness has proved a means of exploiting the farmer 
 or peasant class, and a means also of concentrating farm 
 land in the hands of the few, speculation in land which 
 facilitates and creates indebtedness among the less wary 
 I owners should be subject to regulation.^ 
 
 15. Conclusions: Land speculation may prove socially 
 injurious in four ways: (1) by preventing the best utiliza- 
 tion of agricultural, mineral, and forest land; (2) by keep- 
 ing land ripe for building out of use; (3) by controlling 
 building operations; (4) by overcapitalizing the land. 
 
 It is evident that agricultural land no longer offers such 
 a fertile field for speculative operations as formerly. The 
 immense wealth amassed by individuals as a result of the 
 generous land grants and speculative operations will not 
 be duplicated anywhere soon, but should serve as a lesson 
 to statesmen in their land policies of the future. Even yet, 
 however, when this country has been almost all appropri- 
 ated, agricultural land speculation in the United States 
 has not ceased. Thus the hope of reclaiming some of our 
 
 * CJ. Buchenberger, GrundzUge der deutschen Agrarpolitik (1897), pp. 
 78/.
 
 THE TAX AS A SOCIAL REFORM 385 
 
 western prairies by means of irrigation has given rise to 
 more speculation, resulting in the appreciation of from 
 one hundred per cent to one thousand per cent in the 
 value of some of our western farm land. Sites unsalable at 
 $2 per acre ten or twelve years ago now command $10 to 
 $15 per acre. ^ In general, nevertheless, it cannot be claimed 
 that speculation has led to monopolization in agricultural 
 land. For particular countries and localities, however, the 
 appropriation and withholding of vacant land may entail 
 social losses. The following illustration from Australia 
 will show how this can happen : ^ " In every one of these 
 colonies millions of acres of the richest agricultural land, 
 with ample rainfall and near to markets and ports of ship- 
 ment are used for mere grazing purposes. As a consequence 
 most of the farmers were forced to settle on poorer land, 
 farther from markets and ports, and where the rainfall is 
 less abundant. Land fit only for grazing is thus used for 
 agriculture, while the land fittest for agriculture is used for 
 grazing only." 
 
 Enough has been said about the practice of keeping land 
 vacant or partially utilized in the heart of large cities. It 
 will be noted that several factors determine the extent and 
 effect of this kind of speculation. While high carrying 
 charges and taxation on capital value make the withhold- 
 ing of land unprofitable, they do not foster its best utiliza- 
 tion. Nevertheless, the conditions of congestion are so vari- 
 ous in this country, that there are comparatively few cities 
 where the withholding of urban land is as yet a social 
 menace. Only a careful study of the housing problem could 
 decide in each case the harmful effect of uncontrolled build- 
 ing operations. 
 
 Although on the whole our American cities may be said 
 to suffer from the laissez-faire housing system that pre- 
 vails, attention must also be called to a species of controlled 
 
 Chicago, Real Estate News (1910), p. 106. 
 * Hirsch, Democracy versus Socialism, p. 131.
 
 886 THE TAXATION OF LAND VALUE 
 
 building to be equally deprecated. We refer to the laying- 
 out of towns by "development" companies. Gary, Ind- 
 iana, is an illustration. The Gary Land Company not 
 only graded, laid out, and subdivided the land and under- 
 took the house building, but to this day it withholds the 
 deed of sale from the purchasers of the lots until they shall 
 have complied with the agreement to build within a cer- 
 tain time and on plans approved by the company. ^ How- 
 ever praiseworthy the intentions of certain of such under- 
 takings, abuses of the power which such operations involve 
 can easily be imagined.^ 
 
 Overcapitalization of land, though a common phenom- 
 enon, varies in degree and extent. It is commonly known 
 that suburban land is largely in the hands of speculators. 
 Land near cities, the normal value of which for farming 
 is from $50 to $100 per acre, and for gardening from $300 
 to $1000, may be held at $500 to $5000 per acre by specu- 
 lators, who estimate values in accordance with the antici- 
 pated earnings of the land when it shall have secured the 
 expected utilization.* As to the evil of inflated values, it 
 would seem that this would aflfect only the less shrewd in- 
 vestor, who when values declined to the actual earning 
 capacity of the land might be ruined. From his stand- 
 point we might see nothing unusual in land speculation as 
 compared with speculation in general. But just as over- 
 
 ^ Chicago Red Estate News, 1912, pp. 141-42. 
 
 ' An interesting example in point is thp Pullman City experiment. 
 Mr. Pullman had erected, not only the dwellings for his workmen, but a 
 library, hotel, church, etc. The latter remained vacant for some time, 
 because there was no denomination large enough to pay the required 
 rental. The arbitrary control which the Pullman Company might have 
 exercised over the residents can easily be imagined. Indeed, the possibil- 
 ity of misusing the powers which the company had over the living con- 
 ditions of its employees led to the decision of the court in 1899 requiring 
 the Pullman Car Company to dispose of all its real estate holdings not 
 used in the industry. Cf. Report of the Commissioners of the State Bureaus 
 of Labor Statistics on the Industrial, Social and Economic Conditions of Pull- 
 man, III. (1884), p. 12; also Carwardine, The Pullman Strike (1894), p. 20. 
 
 * Cf. Hurd. Principles of City Land Values, p. 133.
 
 THE TAX AS A SOCIAL REFORM 387 
 
 capitalization in other industries indirectly may enhance 
 prices; so to a greater degree as concerns dwellings, the 
 choice of which involves so many factors besides rental, 
 rents may very likely be affected. To take, for example, 
 the value of land in Chicago; are we to beUeve that the 
 landlords who bought their property on the 1889 basis, 
 to which we are told the value of real estate is only now apn 
 proaching, have been on the whole recipients of less than 
 the expected interest on their investment until the present? 
 Or, in spite of the law of competition,^ did the landlord in 
 many cases not find ample excuse for charging a higher 
 rental because he had overpaid? 
 
 On the whole, therefore, as we contemplate the import- 
 ance of the commodity which is made the object of specu- 
 lative operations, when we consider that the speculator is 
 guided by the possibilities of greatest gain to himself, a 
 motive not always in accord with social welfare, when we 
 recall that the problems of suitable housing and of the con- 
 servation of natural resources are involved, speculation in 
 land is not an unmixed good.^ On the other hand, consider- 
 ing that the complete suppression of speculation involves 
 practically the abolition of private property, and consider- 
 ing the difficulties in the way of such abolition, even if 
 found expedient, this solution is problematical. Govern- 
 ment restriction, however, has been, and will undoubtedly 
 continue to be employed in checking the abuses of specu- 
 lation in land as they arise, and when and where they be- 
 come a menace to the public welfare. The efficacy and 
 expediency of the land tax in suppressing speculation will 
 be considered in connection with the housing problem. 
 
 * The frictional forces that prevent the operation of this law will be 
 discussed in the following chapter. 
 
 * The fact that in some countries, e.g., England, Germany, many muni- 
 cipalities have been compelled to purchase land and to undertake the 
 building of houses for the working classes is a sign of the inadequacy of 
 the present system of realty operations. C/. infra, chapter ix, 10.
 
 CHAPTER IX 
 
 THE TAX AS A SOCIAL REFORM (CONCLUDED) 
 
 1. The growth of cities in the nineteenth century has 
 given rise to numerous social problems, among which there 
 is none more vital than the housing problem. It is unneces- 
 sary to point out that shelter constitutes one of the indis- 
 pensable conditions of existence, nor that land is requisite 
 for the provision of dwelling places. The latter fact shows 
 the relation between housing and land values, for any in- 
 fluences that affect the value of land in any community 
 will be reflected in the housing system of that community. 
 Shelter, it need scarcely be pointed out, means more than 
 protection from the physical elements; it implies all that 
 we to-day regard as essential for the physical, moral and 
 intellectual development of the individual. The home is 
 the basis of the "sacred" family relationships, of physical 
 efficiency, of sociability, of profitable leisure, and of char- 
 acter unfolding. 
 
 Social workers especially are well aware how the eco- 
 nomic, moral, and social welfare of the greater part of the 
 urban population, if not of the entire population, is af- 
 fected by the housing facilities. We need only reflect that 
 from twenty to thirty per cent of the income of the major 
 portion of urban dwellers is expended for rent, and that the 
 industrial development of a community, moreover, is 
 dependent upon the accessibility to suitable locations, to 
 understand how the economic interests of the population 
 are rooted in the housing problem. How the social well- 
 being of a community is hampered by such evils as con- 
 gestion and overcrowding within the home, insanitary 
 buildings, dark and poorly ventilated rooms, the lack of 
 open spaces, has recently been shown in numerous trea-
 
 THE TAX AS A SOCIAL REFORM 889 
 
 tises, in the reports of commissions and congresses, and in 
 various hygienic and social exhibits.^ It has been well 
 established by statistical reports that health is greatly 
 undermined and the death-rate enhanced by insanitation 
 and overcrowding. The high death rate of infants has been 
 attributed to these causes.^ " It was the opinion of physi- 
 cians who appeared before the commission that if the 
 occupancy of the dark rooms now legally occupied is per- 
 mitted, we shall continue to have in the city about 
 28,000 new cases of consumption, and 10,000 deaths from 
 consumption every year." ' When we consider that sick- 
 ness means unemployment and means greater expenditure 
 for medical treatment, the seriousness of the housing 
 problem becomes more obvious. Of no less vital import- 
 ance are the moral influences of insanitary, improper home 
 conditions. It is claimed that the lack of suitable surround- 
 ings in and about the home where the child may play is 
 responsible for much of the delinquency found in large 
 cities. Crime too has been traced to a lack of proper home 
 conditions. This was recognized by the eminent jurist, 
 Liszt, who is credited with saying,* "A reasonable reform 
 in housing is worth more than a dozen penal laws." 
 Another grave evil due to overcrowding is the violation of 
 the recognized standards of decency. In short as Dam- 
 aschke puts it, "Schlafstellenunwesen, Prostitution, Al- 
 koholmissbrauch, Zunehmen des jugendlichen Verbrech- 
 
 * To mention a few: The Ninth International Housing Congress held 
 in Vienna (1910) ; the Tenement House Commission of New York (1900); 
 the New York Commission on Congestion (1910); Housing Exhibits in 
 Chicago and New York (1913); Hygienic Exhibit in Dresden, etc. See 
 The Tenement House Problem, ed. by R. W. DeForest and L. Veiller. 
 
 * Dr. Meinert, a physician of Dresden is quoted as saying: " Wir suchen 
 den Feind wo er sich nicht befindet. . . . Die Prage der hohen Sauglings- 
 sterblichkeit ist im wesentlichen eine Wohnungsfrage." quoted from 
 Mangoldt, Die Stddtische Bodenfrage, p. 892. See Eighth Special Report 
 of the United States Commissioner of Labor (1895), p. 79, where the high 
 death-rate in cities is attributed to housing conditions. 
 
 * Findings of the New Y'^ork City Commission on Congestion (1910). 
 
 * Damaschke, Bodenreform (1912), p. 7G.
 
 390 THE TAXATION OF LAND VALUE 
 
 ertums das alles ist in seinem engen Zusammenhang 
 mit Wohnungsnot und Wohntmgselend heute in alien 
 ernsten Kreisen bekannt!" ^ 
 
 2. If these be some of the serious effects of bad 
 housing upon health and social efficiency, we must ask 
 where and why this evil has arisen. The "slum" consti- 
 tutes to-day a definite section of most of the populous 
 cities, but displays its worst features in London, Dublin, 
 and in about half a dozen cities in the United States. The 
 housing problem is, however, by no means limited to these 
 cities. We may affirm that not only urban but also rural 
 communities suffer from insanitary dwellings. In Berlin 
 and the other German cities, for example, you look in vain 
 for districts resembling Whitechapel, or the East Side 
 (New York), yet investigations in German cities, some 
 scarcely urban, have revealed startling conditions of over- 
 crowding. A large percentage of families occupied but one 
 or two rooms, while many homes were found in which 
 more than six persons were living in a single room.^ Ac- 
 cording to reports and statistics conditions are not better 
 in English cities. To give a few examples: In Glasgow 
 100,000 persons, or one-fifth of the whole population, are 
 reported as living in one-room dwellings. In Liverpool 
 thousands of basements and alley houses in dilapi- 
 dated and intolerable condition, without air and sun, are 
 utilized as homes.' As regards overcrowding, conditions 
 are nowhere comparable to those in Berlin and New 
 York. In both cities the " skyscraper " predominates. 
 But while it is claimed that three-fourths of the popula- 
 tion of New York live in tenements, we find that of all 
 the houses in Berlin 93.79 per cent are occupied by ten- 
 ants, 2.57 per cent by proprietors, and 3.64 per cent by 
 
 * Mangoldt, op. cit., pp. 396-97, 
 
 * Damaschke, op. cit., p. 69. Cf. also Eberstadt, Handbuch des Woh- 
 nungswesens, passim. 
 
 * Fuchs, Zur Wohnungsfrage, pp. 118-19.
 
 THE TAX AS A SOCIAL REFORM 891 
 
 servants. The extent of congestion in Berlin is further- 
 more proved by the following fact: In London there were 
 found to be 7.93 persons to a building site, in Berlin, 
 76.9 persons.^ 
 
 3 The causes of these intolerable conditions are chiefly 
 economic and social. Few cities have originally been laid 
 out deliberately. For the most part their growth has 
 been haphazard. Building permits and sanitation laws 
 were later developments.^ Contractors and owners had 
 houses constructed without regard to artistic design, or 
 uniform height, but after their own sweet will and with the 
 sole purpose of personal gain. It is this laissez-faire policy 
 which is responsible in part for the "slum" conditions. 
 
 A more fundamental cause is the economic factor as it 
 touches the tenant. If we study the population of the 
 "slum," we find that the south European immigrant pre- 
 dominates.' We know that his standard of living is much 
 lower than that of the country to which he emigrates, such 
 as the United States or England, and that his intention in 
 leaving his native country is to earn and save as much 
 money as possible, often with a view to returning to his 
 native country. Hence we should expect him to settle 
 where rent is the lowest. And so he does. If, now we in- 
 quire where rent is lowest, we find that it is generally in the 
 oldest part of the city, which on account of social changes 
 and of the industrial development has been abandoned by 
 
 * Pohle, Die Wohnungsfrage, vol. i, pp. 37, 43. The prevalence of 
 tenements is not always a sign of insanitation, but the congestion and 
 construction of the cheaper dwellings tend to make them insanitary as well 
 as to destroy the privacy of home life, and to hinder home-ownership. 
 
 * For New York the sanitation law of 1882 related to tenements and 
 lodging houses. A similar law was passed for London in 1891. Cf. Eighth 
 Special Report of the Commissioner of Labor (1895), chapter ii. 
 
 ' In St. Louis, for example, the poorest district was inhabited by Jews, 
 who constituted 28.4 per cent; by Italians, who constituted 27.5 per 
 cent; and by negroes who formed 15.7 per cent of the whole number of 
 residents. The Poles were 13.1 per cent and other various nationalities 
 15.3 per cent. Report of the Housing Committee of the Civic League of 
 St. Louis (1908), p. 84.
 
 802 THE TAXATION OF LAND VALUE 
 
 /the native population for uptown residential sections. 
 .Here, where encroachments of all kinds are tolerated and 
 ; where houses have become unfit for habitation, the immi- 
 grant makes his abode. If these insanitary structures are 
 condemned by the building inspector, they are superseded 
 by tenements. The large capital invested in these new 
 structures and the great demand for houses in the "slum" 
 district, cause rents to rise above the level in the suburbs or 
 on the periphery of the town. Then the immigrant is com- 
 pelled to take in more lodgers, to resort to the most in- 
 sanitary, ill-equipped houses (unless the law condemns 
 them all), and to make dwelling-places out of basements, 
 garrets, and dilapidated rear houses. Viewed from another 
 standpoint the low wages of the immigrant may be said to 
 be responsible for the congested and otherwise insanitary 
 conditions. It will be remembered that it is in the " slums " 
 where the sweat shops are to be found. In those sweated 
 industries the insufficient wage forces a lower standard of 
 existence upon the worker. 
 
 Added to the economic is the social factor. The concen- 
 tration of population is generally within the industrial 
 center, where the workmen may be near their places of 
 employment. This section corresponds to the oldest and 
 most undesirable part for residential purposes. Now, 
 when once settled, clannishness, that great social force, 
 tends to keep the persons of one nationality and family 
 together. The strength of this factor of sociability and 
 family ties in engendering the "slum" district is seen in 
 the unwillingness of tenement dwellers to move to cheaper 
 and at the same time more desirable quarters in the city. 
 That racial and social forces are responsible in part for 
 the "slums" is further made evident by the fact that 
 only where immigration has gathered a large number of 
 foreigners does a Whitechapel or an East Side make its 
 appearance. 
 
 4. In view of these conditions it may well be asked, is
 
 THE, TAX AS A SOCIAL REFORM 893 
 
 it the high rent which creates a lower standard of living 
 among the immigrants, or is it the immigrant and his 
 clannishness that raise rent ? The relation between them is 
 reciprocal. As Hurd says, the cause of rent for residences 
 is social as well as economic.^ It will be agreed that not 
 only in tlie slums but in the city as a whole rent and land 
 value tend to increase with the growth of population, that 
 is with the increase in the demand for houses. On the 
 other hand, for the reasons already given, the congestion 
 per acre, the overcrowding per room, and resultant evils 
 are not likely to be relieved much by the development of 
 transportation facilities or by other methods of extending 
 the available residential area. The seriousness of these 
 conditions in our largest cities can scarcely be exaggerated. 
 How, then, shall the urban housing problem be solved? 
 
 Obviously, a reduction in rent will not only afford relief 
 to the poorer classes materially, socially, and even ethi- 
 cally, but, together with legislation regulating building 
 operations and stricter laws of sanitation, may help to 
 eliminate the slums. Before discussing the possibility of 
 lower rents, it is necessary to point out the inefficacy of 
 building regulations when unaccompanied by rent reduc- 
 tions. 
 
 That building and sanit^ion laws are the jfirst steps to- 
 ward the solution of th^ousing problem cannot be ques- 
 tioned. No governmrat, in modern opinion, should permit 
 the individual, even if he so desires, to occupy a dwelling 
 that falls below the recognized standard of sanitation, com- 
 fort and decency. Adequate regulations limiting the height 
 and area to be covered by the building, requiring the in- 
 stallation of sanitary appliances, fixing the minimum 
 width of staircases, the height of ceilings, the size of rooms 
 and windows, and so forth, should not only be enacted, but 
 should be strictly enforced by the building inspectors. 
 Indeed, it might be expedient for all cities to follow the 
 * Principles of City Land Values, pp. 77-78.
 
 8M THE TAXATION OF LAND VALUE 
 
 lead of German communities in promoting the "city 
 beautiful" as well as the city hygienic. "German cities 
 have taught us a valuable lesson in the matter of laying out 
 suburbs. Improvement plans are furnished by the munici- 
 pality, and architects are invited to compete in presenting 
 designs. After it has been decided that a certain district 
 shall be opened up, a jury is appointed to assess damages, 
 terms are made with private owners, and the architect 
 furnishing the most acceptable scheme is awarded the 
 prize." ^ 
 
 What, however, must be the effect of such legislation? 
 Evidently the enhancement of rent because of the increase 
 in the cost of construction. Such has been the result in 
 German cities.^ Indeed, the increased overcrowding there 
 is attributable to the high rents which expensive buildings 
 and improvements tend to create. To keep rents down re- 
 course will be had by those of a lower standard of living 
 especially to increase the number of lodgers. In short, "the 
 poorer classes want cheap houses, must have them; they 
 imderstand what a saving of a sixpence a week in the rent 
 means, but they do not understand yet the advantages of 
 concrete foundations, properly jointed drain pipes or 
 wash down water-closets. They do not mind taking a few 
 lodgers into an already well-filled house, because they 
 understand the advantages of a few shillings a week, but 
 they do not understand that each inhabitant of a sleeping- 
 room should have at least 500 cubic feet of air space." ' 
 Thus the method of solving the housing problem by 
 restrictive building regulations may be rejected as futile. 
 
 In considering the possibility of reducing rents to relieve 
 congestion, we may begin by analyzing the factors that 
 enter into the determination of rent. And it will be con- 
 
 ^ Eighth Special Report of the U.S. Commissioner of Labor (1895), p. 
 93. 
 
 * Pohle, " Die Wohnungsfrage " in Handbuch der Politik, vol. n, pp. 
 522, 524. 
 
 5 Thompson, The Housing Handbook, p. 173.
 
 THE TAX AS A SOCIAL REFORM 895 
 
 venient to classify these factors under ground rent and 
 building rent. Ground rents are affected by the popula- 
 tion, by transportation facilities, by the industrial devel- 
 opment, including the kinds of industries carried on, by 
 the system of land tenure and speculation, by racial ties 
 and other social considerations. Some of these tend towards 
 a reduction, others towards an advance in rentals. Friction 
 from offsetting and opposing influences may therefore be 
 expected. Thus, the tendency of improved facilities of 
 transit to draw the population to the periphery of the 
 town would be offset by the clannishness which has drawn 
 the foreigners to a particular neighborhood, generally in the 
 center of the town. The elements entering into building 
 rents are chiefly the various expenses of operation, deter- 
 mined by the conditions of the labor market, especially in 
 the building trades, the available capital for building, the 
 cost of materials, taxes, condition of the mortgage loan 
 market, etc. Under frictional influences may be classed 
 the immobihty of invested capital, the leasehold and con- 
 tract system, and above all the strong force of custom. 
 Relief of congestion through a reduction of rents may be 
 of two kinds, reduced congestion per unit of ground space, 
 e.g., per acre, and per room. 
 
 Viewing the housing problem thus from the economic 
 standpoint, its relation to the tax on land value becomes 
 clear. For the tax may be expected to affect a number of 
 the elements enumerated which make up rent. We have 
 now to examine the possible results on housing of the land 
 tax, as they have been deduced theoretically by the adher- 
 ents of the tax on the one hand, and the adversaries on the 
 other. 
 
 5. First, on the part of the advocates it is claimed that 
 the land tax would affect congestion in the following 
 manner: First, as the tax would make it expensive to keep 
 property unoccupied, vacant land would be forced into the 
 market. As a consequence, secondly, the market price of
 
 S9G THE TAXATION OF LAND VALUE 
 
 land would tend to be reduced and land values would be- 
 come more stable. This result would also follow, thirdly, 
 when the lure of the value increment is in part removed; 
 that is, speculation would be curtailed, and overcapitaliza- 
 tion discouraged. Fourthly, the incentive to improvement 
 would be created both by the high carrying charges on 
 unimproved land, and by the untaxing of buildings. The 
 latter would attract more capital into the building trades 
 and would result in a larger number of available houses. 
 Fifthly, the remission of the tax on buildings would benefit, 
 not the builder (except indirectly), but the tenant, upon 
 whom the tax ultimately falls. 
 
 In the platform of the United Committee for the Tax 
 on Land Values in England it is stated,^ "If urban and 
 suburban land were taxed on its true unimproved value, 
 irrespective of the use to which it happens to be put or not 
 to be put; the iron girdle of land monopoly which now 
 confines every large town and industrial center, every vil- 
 lage, and every hamlet, would be broken through, and we 
 should have more and cheaper dwelling houses, shops, 
 oflSces, warehouses, and factories." 
 
 The reasoning by which the above deduction was 
 derived needs no further elucidation. It is noteworthy, 
 however, that the argument rests merely on the expediency 
 of the tax on capital value versus that on rental value. 
 Disregarding the assumption of monopoly in urban land, 
 many will agree that the English rating system on annual 
 value tends to encourage the withholding of land from use.^ 
 The passage quoted above, though it contains a grain of 
 truth, is far too sweeping. Obviously, the degree to which 
 the tax will be effective, even if the salutary influence be 
 
 * Third Annual Report, p. 64. 
 
 * " Lawson Purdy, the chairman of the Department of Taxes and As- 
 sessments for New York, expressed the opinion that were rates levied on 
 actual capital value in London as in New York, nearly all Regent Street 
 would be pulled down and a large part of the Strand." Chomley and 
 Outhwaite, op. cit., p. 78.
 
 THE TAX AS A SOCIAL REFORM 807 
 
 admitted, will depend upon the rate of tax, the prospects 
 of its being increased, the amount of available vacant and 
 undeveloped land, the counteracting forces, e.g., the in- 
 crease in population, local improvements, and all other 
 conditions that enter into building rents. 
 
 With regard to the stimulation of building operations the 
 following passages are illustrative of the trend of thought: 
 *'Yet another argument which may be adduced in favor of 
 the rating of site values, is that in consequence of urban 
 land coming more freely into the market and building 
 enterprises being stimulated, rent would be materially re- 
 lieved; and this relief would come where rent is now at its 
 maximum, i.e., in our large industrial centers. . . . Every 
 opportunity given to the freer growth of the city in 
 the suburbs will tend to reduce this congestion at the 
 center." ^ 
 
 This quotation refers to the first method of creating an 
 impetus to building, namely, by making the holding of 
 vacant land "for a rise" unprofitable. In the following 
 passage emphasis is laid on the effect of the untaxing of 
 buildings: ' "Again, we should be freeing buildings from 
 the burden of rates. By levying rates on buildings, we 
 make buildings dearer, and the inevitable consequence is 
 that fewer are built. Under our present system of rating, 
 builders cannot afford to build, because occupiers cannot 
 afford to occupy so many or such good houses as they 
 could if buildings were not liable to be rated. If we cease 
 to levy rates on the value of buildings, we shall remove the 
 first of the two main causes of the dearness and scarcity 
 of houses." 
 
 Here, too, whatever truth the above claims may contain, 
 they are vitiated by too general assumptions. For instance, 
 they take it for granted that the demand for houses is 
 
 * Alden and Hayward, Housing, p. 94. 
 
 * Quoted by Thompson {op. dt., p. 264) from a leaflet issued by the 
 Liberal Publication Department.
 
 898 THE TAXATION OF LAND VALUE 
 
 elastic, that there are no limits to the available capital for 
 building purposes, that mortgage loans will remain un- 
 affected, that the effect of the overbuilding stimulus will 
 not increase the cost of labor and materials, etc. To be 
 sure, when these frictional forces are pointed out to the 
 proponents of the tax they defend their position by more 
 general statements. For example, they maintain that 
 where rent consumes more than one-fifth of a family's 
 income, crowding is the inevitable result. The reduction in 
 rental, through the greater number of available dwellings 
 would increase the demand for newer, larger accommo- 
 dations, and would enable some of the large "lodging" 
 population to establish homes of their own. As to the 
 question of available capital, they point to the present 
 excessive tax on buildings in comparison with that on other 
 forms of capital. They urge further that under the present 
 system of taxation, the cost of building is prohibitive 
 except to meet the urgent demand for housing. That the 
 effect on mortgage loans should be wholesome is deduced 
 from the doctrine of capitalization. The value of the land 
 under the tax would not fall below the capitalized net 
 rental, either accruing or prospective. Land and buildings 
 would, therefore, be safer securities than to-day, when the 
 tendency is to overcapitalize the value of the land. With 
 these important doctrines of the defenders before us, we 
 shall next epitomize the arguments of the opponents of the 
 tax system. 
 
 6. The chief criticism of the theories concerning the 
 consequences of the tax on land value, namely, that the 
 numerous and offsetting elements that compose rents are 
 lost sight of, as well as the frictional forces at work in social 
 phenomena, gives the clue to the contentions of the 
 opposition. First, consider the questions of vacant land 
 and speculation. The prevalence of vacant land ripe for 
 building is denied by some, while others even hold that 
 building operations depend upon this speculative feature
 
 THE TAX AS A SOCIAL REFORM S99 / 
 
 in realty holdings.^ So long as there is a large number of 
 vacant houses, it cannot be said that land is held vacant 
 for speculative purposes; especially does this apply where 
 the tax rates are high. The land must sometimes be kept in 
 an unimproved or underimproved condition because of the 
 possibility of change in the character of the neighborhood, 
 and for other sound reasons. The validity of this position, 
 however, cannot be decided theoretically. And yet, in 
 studying the facts, the diflBculty arises of fixing the stand- 
 ards of underdeveloped and appropriately improved land. 
 These terms will probably have different meanings in 
 different localities and countries, and the prevalence of 
 such underdevelopment will probably vary from place 
 to place. ^ 
 
 Secondly, granting that the imposition of the tax will ^^ 
 cause a decline in land value, and that it will induce the / 
 owner to build upon his land, might not this incentive and / 
 the untaxing of buildings lead to a more intensive use of / 
 the land? The dangers of an overutilization of the land ' 
 from the standpoint of the housing problem are generally 
 admitted. Not the congestion per room, but the greater 
 congestion per acre is threatened thereby. If the improve- 
 ment of the suburban districts only were stimulated by the 
 tax, a general reduction of congestion in the city would be 
 conceivable. But it is reasonable to expect that the more 
 expensive the land, i.e., in the heart of the city, the greater 
 would be the incentive to improve it. It is feared, therefore, 
 that an overdevelopment might ensue, that the skyscraper 
 would become more prevalent than the need of the com- 
 munity would warrant. The possibility of compact build- 
 ing, moreover, carries with it the utilization of the now 
 available open spaces and even of garden space. The ad- 
 herents of the new system admit the gravity of the charge 
 with respect to lofty and compact building; they are less 
 ready to admit the deleterious effect on garden space. To 
 * Cf. supra, chapter ru, 5.
 
 400 THE TAXATION OF LAND VALUE 
 
 the first charge answer is usually made, that the intensive 
 utilization of the land is a tendency which will continue 
 irrespective of the tax. Indeed, the trend toward compact 
 building may have been caused and furthered by the with- 
 holding of land from use. To overcome the dangers to 
 good housing, the government will be compelled sooner or 
 later to restrict and control building operations according 
 to a well-laid-out town-planning scheme. It would seem, 
 therefore, that legislation, at least restricting the height of 
 bmldings, would have to precede the introduction of the tax. 
 
 On the other hand, by opening up the suburbs, and by 
 relieving the tenant in the center of the city, the necessity 
 for tall buildings would be removed and the tendency 
 toward more intensive utilization would be checked. 
 Logically, it might even be reasoned that with the greater 
 competition for tenants, the desires of the dwellers would 
 be consulted in building more than at present. Further- 
 more, every one is aware that houses with gardens and 
 open spaces are more desirable and valuable; and if the 
 owner is looking forward to an increase in the value of his 
 property in the future, he will prefer to keep it in a more 
 desirable condition, fronting on a lawn or open space. It 
 should be remembered, moreover, that the decline in the 
 value of the land is expected to enable and encourage more 
 persons to own their homes, especially in the suburbs. It is 
 likewise expected that the reduced value of land will 
 counteract the movement towards the more intensive use 
 of the site. 
 
 Thirdly, the eflficacy of the tax to promote building op- 
 erations has also been questioned on various grounds. We 
 are famiUar with the theory that the curtailment of specu- 
 lation, i.e., the reduction in prospective value increment, 
 will tend to discourage building.^ Another reason given to 
 
 * The untaxing of buildings would not necessarily relieve the owners 
 who occupy their homes. The effect would depend upon the relative 
 values of the building and site.
 
 THE TAX AS A SOCIAL REFORM 401 
 
 deny that a building "boom" will ensue is that the de- 
 mand for houses is inelastic, that overbuilding could not 
 go on indefinitely. While, therefore, a decrease in rent 
 might have the effect of temporarily stimulating the 
 erection of new buildings, and of providing larger and 
 better accommodations, the tendency would check itself. 
 For, granted that modem types of buildings will tend to 
 supersede the older and inappropriate structures, and that 
 the latter will be torn down, the increased cost of con- 
 structing the new buildings will check the overbuilding 
 trend. Moreover, the incentive for capital to be em- 
 ployed in building, which will at first ensue, will be 
 checked when the rate of profit in that industry be- 
 comes the current rate in other industries. But, say the 
 adherents, even these assumptions insure a decided im- 
 provement in housing conditions. 
 
 Fourthly, with respect to the doctrine that the remission 
 of the tax on buildings would redound to the benefit of the 
 tenant in the shape of reduced rents, no account is taken 
 of the friction that may be expected to develop in the 
 readjustment. Aside from the reputed immobihty of the 
 population, aside from custom which largely determines 
 the possible expenditure for rent, aside from existing lease- 
 holds, the tax on land value may itself set in motion various 
 forces to enhance rents. Most important is the assertion 
 that owners of improved property count upon the prospec- 
 tive increments in land value to counterbalance the de- 
 terioration of the building. Thus rents are assumed to be 
 lower than if the owner had to provide a depreciation 
 fund. With the heavier tax on land value, such a reserve 
 fund would be necessitated, adding to the building cost. 
 This would result in higher rents. Again, by the decline in 
 land value, property would no longer be worth as much as 
 security for mortgage loans. Moreover, since the mort- 
 gagee takes the prospective increment into account in mak- 
 ing the loan, the effect of the tax would be either to reduce
 
 ,iOi THE TAXATION OF LAND VALUE 
 
 the amount of available capital for building, or to raise the 
 interest rate,^ in which cases rents would tend upward. 
 These arguments assume, however, that building opera- 
 tions are a distinctive industry dependent upon land- 
 ownership and land speculation. We have already pointed 
 out how the widespread leasehold system in itself seems to 
 contradict this theory.* 
 
 Lastly, in a dynamic society, further friction might be 
 expected to arise to counteract the movement toward 
 reduced rents. Assume the reduction of rent in one com- 
 munity, and would there not be an influx of outsiders to 
 take advantage of the reduction.? Moreover, the normal 
 increase in population in a progressive community and the 
 rise in the cost of materials and labor, if the stimulation in 
 building becomes general, would tend to check the allevi- 
 ating influences of the tax. 
 
 7. Turning from the theoretical discussion of the 
 effect of the tax on housing, we ask what are the facts? 
 Our study has demonstrated the futility of attempting to 
 determine precisely the influences of the tax in the presence 
 of so many interacting social forces. Whether attributable 
 to the fact that the growth of the community has offset the 
 forces set in motion by the tax, or that the tax rate has been 
 too slight' to affect market values, or that the actual results 
 of the tax on land and of the remission of the tax on im- 
 provements have not conformed with theory, the reports of 
 the officials and the statistics for certain communities 
 where the tax is in operation show that rent cannot have 
 been materially affected by the tax. 
 
 On the other hand, the available data do reveal an ac- 
 tivity in building operations in the Australian and Cana- 
 
 ^ A rather ingenious theory with respect to the effect on mortgage loans 
 was propounded at the public hearings of the New York Committee on 
 Taxation. The lower land value would mean less capital loaned on mort- 
 gages, with the result of a larger amount of available capital for building 
 operations at a lower rate of interest.'; 
 
 * Supra, chapter vii, 5.
 
 THE TAX AS A SOCIAL REFORM 403 
 
 dian municipalities which is generally attributed in part 
 to the exemption of improvements. There was no evidence 
 of overbuilding in Australasia; in Canada, on the other 
 hand, the excess in vacant buildings in some of the towns 
 in recent years has been charged to the operation of the 
 tax. Whether this condition of overbuilding existed during 
 the land "boom" period, when newcomers in some cities 
 had to resort to tents for shelter,^ has not been established. 
 Nor is it possible to determine the effectiveness of the tax 
 on value increment to influence notably the land market 
 and building operations from the stagnant conditions in 
 both fields after the imposition of the taxes in England and 
 Germany. In the latter country, the unfavorable market 
 conditions, traceable, however, to the general depression for 
 which the tax legislation was not responsible, played a con- 
 siderable r61e in the amendment of the law. The English du- 
 ties on land value were likewise ineffective in preventing the 
 temporary slump in the building trades of London in 1911, 
 and failed to relieve the serious housing conditions there.' 
 But, in judging the tax, aside from the unfavorable effect 
 of the general industrial depression, it must be borne in 
 mind that the stimulation of building in the case of the tax 
 on value increment could not be expected to be the same 
 as in the case of a general untaxing of buildings. While the 
 influence of the tax on building operations is not traceable 
 in the extraordinary increase in structures in western 
 Canada before the depression, the general agreement 
 among the Canadian builders themselves, as to the efficacy 
 of the tax in stimulating building seems to substantiate 
 the generally accepted theory, rather than that which 
 holds that the tax will interfere with building operations. 
 Difficult as it is to assert any positive effect of the tax 
 on housing conditions, it is more difficult to discover its 
 
 ^ Cf. Haig, Exemption of Improvements from Taxation in Canada and 
 the United States, p. 273. 
 * See supra, chap, v, pp. 248 Jf.
 
 404 THE TAXATION OF LAND VALUE 
 
 effect on speculation in land. We know that speculation 
 is still rampant in the countries under the system of land- 
 value taxation. And in the circumstances existing in 
 western Canada, it would seem that the tax was introduced 
 in part to further the speculators' interests.^ In Austral- 
 asia, the state land taxes, except in New Zealand, are not 
 heavy. But in the latter colony, evidence of the dis- 
 integration of the large holdings exists, and the cause is 
 generally found in the high graduated and absentee rates. 
 On this question also, our conclusions in the absence of 
 positive proof, must be qualified. We may assume that a 
 tax levied on a commodity on the basis of its capital value 
 will tend to discourage dealings in that commodity. Also 
 that a tax on land, as is generally conceded, tends to 
 encourage its utilization. Thus it would seem that the 
 realty tax on capital value in American cities has made the 
 withholding of land "for a rise" less profitable than in 
 England. It follows, even, that were the tax high enough, 
 as high as the transfer duties in Paris,^ for example, realty 
 operations would be greatly subdued. But where land 
 rises rapidly in value, speculation will continue to thrive, 
 irrespective of the tax. So much may therefore be assumed : 
 since anything which lessens the anticipated income from a 
 commodity will generally decrease the desirability of that 
 commodity for speculative purposes, a discriminatory tax 
 on land will put a damper on realty transactions and 
 speculation. The degree of suppression will depend on the 
 rate of tax and the trend of land-value increments. 
 
 8. In the preceding chapter it was found that specula- 
 
 i * Cf. tupra, chapter vi, 5. 
 
 * In Paris there is a tax of six per cent on the transfer of the deed and 
 three and one-fourth per cent for other expenses, making a reduction of 
 nine and one-fourth per cent of the value on every transfer. Of course the 
 expectation even of an increase in tax rate suffices to give speculation in 
 land a set-back. Cf. Reports on City Real Estate Values, compiled by 
 Seattle Real Estate Association (1907). Cf. also Congrh International 
 de la PropriStS FoncQre (1900), p. 109.
 
 THE TAX AS A SOCIAL REFORM 405 
 
 tion in land had its function in society under private 
 ownership, but Hke other social privileges it was capable of 
 abuse. The time arrives when the government is called 
 upon, or compelled, to check the abuses of social institu- 
 tions. The proposals and the legislation already employed 
 to remedy the evils arising from landed property are many, 
 but chiefly ameliorative. The most radical proposal is the 
 public appropriation of the land. The question of the 
 expediency of land nationalization is, moreover, closely 
 allied to that of the tax on land value. For the underlying 
 motives of both proposals, as social reforms, are essentially 
 the same. Without entering into the theoretical inquiry of 
 the justice of private versus social property in land, the 
 facts and arguments for and against the practicability of 
 pubUc appropriation will throw light upon the social ex- 
 pediency of the tax on land value. 
 
 Of the advocates of public ownership, there are those 
 who, like the Single Taxers,^ favor the nationalization of 
 all the land; others who, like Professor Adolf Wagner,^ have 
 pointed out the need of the municipalization of urban land, 
 not of the rural landed estates; others again, a more numer- 
 ous class, who urge public ownership only of the natiu-al 
 resources, mines and forests for conservation purposes. 
 In examining the reasons advanced in defense of these 
 positions the threefold classification of land of the preced- 
 ing chapter will be of assistance. For it is evident that, 
 if the conclusions with regard to the trend of value of the 
 several kinds of land are valid, public ownership may be 
 less expedient in one case than in another. 
 
 * Of the noted economists who favored nationalization John Stuart 
 Mill and IA>n Walras (see EUments D' Economic Politique) have exerted 
 a great influence. The latter has even more persistently and tenaciously 
 defended the proposal for the Single Tax. 
 
 ' How far Professor Wagner would go with regard to restricting the 
 private ownership of urban land is not certain. Cf. his Grundlegung, vol. 
 II, p. 470 ff., as well as his speech on " Finanz- und Steuerfragen," in 
 Schriften der GesellschafifUr Sosiale Reform (1904), Heft 15, pp. 28/.
 
 406 THE TAXATION OF LAND VALUE 
 
 9. From the standpoint of the appreciation of land 
 value no reason exists, generally speaking, for the public 
 appropriation of agricultural lands, which are characterized 
 by decrements and fluctuating value, rather than by incre- 
 ments. Nevertheless, large land holdings prevent the best 
 utilization of the land and tend to impoverish the peasant.^ 
 The data showing the extent and significance of this con- 
 centration of land lend weight to the argument. 
 
 The experience of Australasia ^ with absenteeism and 
 large landed estates is not peculiar. The conditions in most 
 European countries (France and part of Germany ex- 
 cepted) are similar. The concentration of land holdings in 
 England is notorious. From statistics of England and 
 Wales in 1872-73,' it has been shown that 4917 owners 
 (.5 per cent of the. whole 'number) occupied each from 
 1000 to 10,000 acres, altogether 42.3 per cent of the whole 
 area, and 21.8 per cent of the product. Of the whole area of 
 England and Wales (London not included) 10,207 persons 
 owned two-thirds; of 18,950,000 acres in Scotland, one 
 person owned 1,376,000, while 1700 persons possessed 
 nine-tenths of the whole area. In Ireland, 1942 persons 
 ("these owners cannot even be counted among the inhabit- 
 ants, for they are mostly absentee landlords!") owned out 
 of the 20,160,000 acres, two-thirds of the whole."* "Two- 
 thirds of England, nine-tenths of Ireland, and nineteen- 
 twentieths of Scotland," says Mulhall," ^ "are held in own- 
 
 * See Sering, "Die Innere Kolonisation in Ostlichen Deutschland," 
 in Schriften des Vereins fiir Socialpolitik, vol. LVI, pp. 26 Jf. 
 
 * See supra, chapters ii and iii. 
 
 Wagner, Grundlegung (1894), vol. n, p. 371: "Die colossale Concen- 
 trirung riesiger GrundstUckscomplexe und Grundrentenbeztige in wenigen 
 HS.nden Msst sich aber bestimmt nachweisen. ... In Deutschland und 
 England ist der landliche Kleinbesitzerstand von der Staatsgewalt den 
 grossen Grundherren preisgegeben worden." Then follows a description 
 of the condition, the superseding of the small farmers, and that lawfully, 
 by the big landed proprietors. See ibid., p. 374. 
 
 * Ibid. 
 
 ' Mulhall, Industries and Wealth of Nations, p. 64.
 
 THE TAX AS A SOCIAL REFORM 407 
 
 ership by a small group of persons." The following more 
 recent statistics show clearly the concentration of EngUsh 
 land in the hands of comparatively few individuals. Thus, 
 while in France, of the 7,200,000 of the population engaged 
 in agriculture, 1,638,000 were owners of land; in the United 
 Kingdom out of an agricultural population of 2,530,000 
 only 19,275 were land owners.^ But the difference in the 
 size of the estates is equally noteworthy; in France the 
 average estate was 56 acres, in the United Kingdom it was 
 3003 acres. 
 
 In Austria-Hungary the two largest landholders were 
 said to be the Crown and the Rothschild family, the latter 
 owning eight times as much as the royal family.^ The fol- 
 lowing data appeared in " Vorw^rts,"' the Socialist German 
 daily: Fifty-two per cent of all the landlords owned some- 
 what less than three-fifths of the land in Hungary, while 
 only .09 per cent of the proprietors owned 31.19 per cent, 
 nearly one-third of the land. Or take Bohemia as an illus- 
 tration of the concentration of the land. Here sixteen 
 persons were said to own ten per cent of all the land.* 
 
 Serious as this charge against private land ownership is, 
 it is highly questionable whether from the standpoint of 
 production state ownership would be advantageous. To 
 utilize rural land most efl&ciently private ownership is 
 regarded as essential. It is an undisputed fact that where 
 the cultivator is the owner under the existing system, the 
 state of husbandry is most favorable. Whether under a 
 
 * These figures exclude estates of less than twelve acres. (Mulhall, 
 Industries and Wealth of Nations, p. 115.) If, however, the small holdings 
 from one to twelve acres are included, the total number of holdings in 
 Great Britain owned by their occupiers was, in 1911, 60,217 or 11.73 per 
 cent of all the holdings. " Since 1888 there has been an almost uninter- 
 rupted decline in the proportion of the acreage owned by the occupiers." 
 Agricultural Statistics (Cd. 6021), 1911, pp. 9-10. 
 
 * FlUrscheim, Einziger Rettungsweg, pp. 78, 161. 
 
 * April 11, 1909. The data were obtained from a current edition of 
 Jahrhundert in Budapest. 
 
 * FlUrscheim. op. cit.
 
 408 THE TAXATION OF LAND VALUE 
 
 leasing system by the state a suflficiently secure tenure 
 could be assured the tenant to induce him to invest the 
 same amount of capital as if he owned in fee simple is a 
 matter of speculation. Not only from the standpoint of 
 production, but also from that of administration state 
 ownership would be a precarious undertaking. Added to 
 these considerations the method of appropriation must 
 be inquired into. The impossibility of purchasing all the 
 land leaves only one course clear, namely confiscation, a 
 measure justified in extreme exigencies only. In judging 
 of the expediency of the nationalization of the soil, there- 
 fore, the evils of absenteeism, of large holdings, of peasant 
 exploitation and pauperization in some countries must be 
 weighed on the one hand; on the other, the responsibility 
 that ownership would impose upon the state, the efficiency 
 of public versus individual enterprise, the security of tenure 
 under private ownership, the trend of depreciating and 
 fluctuating agricultural values, and the revolutionary, con- 
 fiscatory means to be employed. Nor must it be forgotten 
 (1) that the concentration of agricultural holdings is 
 characteristic only of certain countries,^ and (2) that other 
 legislative action has been proposed to disintegrate the 
 large estates.^ 
 
 The effectiveness of the tax on land value to overcome 
 the deficiencies of private landownership, will depend 
 chiefly upon the vigor with which the screw is tightened. 
 The low tax rate which now prevails has had little effect 
 in disintegrating large estates, for the expectation of a 
 future value increment conduces to the payment of the 
 
 * In the United States about five-sixths of the farm land is in private 
 hands. In forty-eight per cent of our area the size of farm holdings is 
 increasing, in the remaining fifty-two per cent the size is either decreasing 
 or there is no appreciable change. The tendency toward the increase in 
 size of holdings is more pronounced in the newly settled western states. 
 Report of the U.. S. National Conservation Commission, vol. i, p. 84. 
 
 * Cf. in England, the Small Holdings and Allotments Acts; in Ger- 
 many, the colonization laws (Ansiedelungspolitik).
 
 THE TAX AS A SOCIAL REFORM 409 
 
 tax rather than to relinquishment of the holding. But if 
 made too discriminatory, the same objections apply as to 
 public appropriation and confiscation with which it may 
 become identical. To be most effective, the tax should 
 be levied (1) according to a progressive scale of rates to 
 strike hardest at the large and absentee landlord, (2) with 
 a minimum exemption embracing most of the land under 
 cultivation, and (3) by the state or central authority, that 
 alone should retain the power to use the tax as a weapon of 
 social reform. Thus far only New Zealand has found it 
 expedient to apply the weapon vigorously. But at all 
 events, by the levy of the wild land, the increment and 
 graduated taxes, the government shares the value incre- 
 ment without imposing a very great burden upon the large 
 holder, while exempting the small owner and cultivator 
 altogether. 
 
 For local revenue, the expediency of a tax on land value 
 . in rural districts will depend upon other conditions. Levied 
 in conjunction with the state or county rate, the imposi- 
 tion may put an extra burden upon the rural district, while 
 it relieves the owners of urban property. For local purposes, 
 on the other hand, with local autonomy, or with apportion- 
 ment according to expenditure,^ the tax on land value, 
 provided it is sufficiently productive, would be a decided 
 improvement over the present widely current general 
 property tax, which taxes stock and agricultural imple- 
 ments. The exemption of all improvements, such as build- 
 ings, would occasion but a slight increase in rate because 
 their value is small in comparison with that of the land. 
 An additional rate on vacant and absentee holdings, as is 
 practiced in Canadian rural municipalities, might in some 
 cases more than recompense the loss in revenue through 
 the exemption of improvements. 
 
 10. In so far as professional land speculation is com- 
 bined with speculative building operations, and in so far as 
 * C/. Purdy, Local Option in Taxation, pp. 18-19.
 
 410 THE TAXATION OF LAND VALUE 
 
 speculative, overcapitalized values may, though indirectly, 
 drive up rent (especially likely because so many factors 
 enter into the choice of dwellings), the expediency of 
 checking speculation in urban land may become urgent. 
 But these abuses of private property rights have played 
 only minor roles in producing the acute housing prob- 
 lem which it is sought to solve. It is not to be wondered 
 that the improvement in housing considered "as part of 
 the great work of national regeneration with a view to 
 secure the health, safeguard the pockets, and raise the 
 housing standard of the working classes," ^ should be 
 regarded by many as dependent primarily upon govern- 
 ment control of building operations and ownership of the 
 land. The advantages of municipal land ownership have 
 been enumerated as follows: ^ 
 
 (1) More economical grouping of buildings instead of 
 the odd and scattered houses of the "jerry builder" would 
 ensue. 
 
 (2) Non-speculative land values would cheapen building 
 sites. 
 
 (3) Buildings on a large scale erected by the municipality 
 would reduce the expenses of construction. 
 
 (4) Or, if the land were leased to companies of working 
 men or builders, and capital advanced to them by the 
 public loan association at low rates of interest, a saving 
 would result. 
 
 (5) The municipality would be satisfied with a smaller 
 profit than the individual owner. 
 
 (6) The management of a large number of dwellings 
 would reduce expenses. 
 
 (7) Capital could be borrowed at lower rates of interest. 
 
 * Thompson, The Housing Handbook, p. 151. 
 
 * Ibid. Mr. Thompson was not considering the municipalization of all 
 the land, but the housing experiments undertaken by certain English 
 cities. Cf. also, " Report of the Land Enquiry Committee," The Land 
 (1914), vol. II, pp. 108 Jf.
 
 THE TAX AS A SOCIAL REFORM 411 
 
 It will be noted that this assumes the municipality to be 
 not only the landowner, but the contractor, builder, and 
 loan agency as well. In view of the radical change which is 
 here involved, we may ask to what extent the above ad- 
 vantages of municipalization may be expected to material- 
 ize. In the absence of any experience with municipal land 
 ownership as a whole, it may nevertheless be of value to 
 review the results of minor municipal housing operations. 
 Germany and England furnish examples. The "Boden- 
 politik" of German towns ^ is rapidly spreading. Many 
 building experiments on town land have been tried. In 
 Ulm, for example, where the government owns a large 
 portion of the land, houses have been erected at public 
 expense and the property sold to private individuals under 
 restrictions, e.g., the government retaining the right to 
 repurchase the property under certain conditions (Wieder- 
 kaufsrecht). Frankfurt a. M. and Leipzig, on the other 
 hand, find it expedient to lease their land for building for a 
 term of years, after which the property reverts to the 
 cities (Erbbaurecht). Freiburg i. B. and Zlirich, on the 
 other hand, have experimented with the erection of houses 
 on their town land which they rent directly to the occu- 
 piers.2 As these undertakings have been in operation but a 
 short time, and are of small scope, i.e., only a small per- 
 centage of the population have been accommodated, the 
 evidences of success are inconclusive. According to Dr. 
 Pohle ' only a small proportion of the inhabitants have 
 availed themselves of these houses and, generally speaking, 
 no material reduction in rental has ensued. 
 
 Similar motives, the betterment of the housing condi- 
 tions of the working classes, actuated the passage of the 
 English Housing Acts of 1890 and 1900. Part III of the 
 amended Act provides for the compulsory purchase by the 
 
 * See supra, chapter iv, 8. 
 
 * Pohle, " Die Wohnungsfrage," in EandJbuch der Politik, vol. n, p. 522. 
 
 * Ibid. Sect also hb Wohnungsfrage,
 
 412 THE TAXATION OF LAND VALUE 
 
 local authority of land in the outskirts of the town to be 
 built upon in any one of the following ways : ^ 
 
 (1) By the council. 
 
 (2) By leasing the land to companies, or builders, or to 
 working men for the erection of workmen's dwellings; or 
 
 (3) By "any company employing workmen, or estab- 
 lished for constructing or improving workmen's dwellings; 
 or by any private person or persons entitled to a free-hold 
 estate in land or to lease for an unexpired period of fifty- 
 eight years who may borrow from the Public Works Loan 
 Commissioners at low rates of interest for not more than 
 forty years, half the amount required to erect dwellings 
 for the working classes, and may supply water or gas to the 
 tenants free of charge or on favorable terms." 
 
 Many local authorities have already taken advantage of 
 the provisions of this Act, among which are London, 
 Glasgow, Liverpool, and Manchester. ^ The following sum- 
 marizes the "commercial" success of "sixteen municipal 
 housing schemes involving a capital outlay of about 
 1,300,000":' "They show a gross return of about 
 6^ per cent, and a profit of about S^ per cent. ... In eight 
 cases the profits have been more than suflBcient, not only to 
 pay interest on the capital outlay, but also to provide the 
 whole of the sinking fund contributions. In nine cases the 
 profits have been more than sufficient to pay interest on 
 
 * Thompson, op. cit., p. 35. 
 
 ' Under the amended Act of 1909, the supply of working-class dwell- 
 ings by local authority and the purchase of land compulsorily have been 
 greatly stimulated, as is shown from the subjoined data {Report of the 
 Land Enquiry Committee, vol. ii, p. 215) : 
 
 HOUSES AND TENEMENTS BUILT BY THE LOCAL AUTHORITIES IN 
 ENGLAND AND WALES, 1890-1913 
 
 Year* 
 
 Houset 
 
 TenemenU 
 
 Lodging-houtet 
 
 1890-1899 
 190<>-1909 
 1910-1913 
 
 822 
 3594 
 4867 
 
 772 
 
 1955 
 
 197 
 
 S 
 S 
 
 * Thompson, op. cit., p. 171. ,
 
 THE TAX AS A SOCIAL REFORM 413 
 
 capital, but have only provided part of the sinking fund. In 
 only three cases, Liverpool (blocks) and Manchester (blocks 
 and tenements), have the profits been insufficient to pay all 
 the interest on capital. When it is remembered that the 
 workmen tenants of those dwellings contribute 21,157 a 
 year to the rates and taxes, and over 10,000 a year to a 
 sinking fund for the purpose of buying property for the 
 community at large, it must readily be admitted that more 
 reasonable financial arrangements ought to be supported 
 by Parliament so as to enable the rents to be reduced." 
 
 When the dilapidated, insanitary housing conditions of 
 a city become as threatening as in Glasgow and London, 
 for example, unless other remedies can be found, the muni- 
 cipality ^ may be compelled to resort to public building 
 operations, just as cities now operate other public utilities. 
 In that case, however, the European experience tends to 
 show that the anticipated economies of government own- 
 ership must be waived, for commercially speaking, such 
 undertakings have seldom been remunerative.'' With all 
 the savings in the expenses of construction, the municipal 
 building enterprises not only have not yielded a profit so 
 high as that of the private landlords, but they have not 
 even been instrumental in lowering the rental.' What 
 they have accomplished is, nevertheless, of great impor- 
 tance, namely, the improvement of the standard of 
 housing. 
 
 It must be admitted, however, that such partial experi- 
 
 * In the opinion of certain members of the National Housing Associa- 
 tion the slums in English cities " while similar to those of Philadelphia 
 and Baltimore are not as bad as the worst in the American cities." The 
 Survey, October SI, 1914, p. 108. 
 
 2 IWd. 
 
 * Thomspon, op. cit., p. 178. It may well be that the financial failure 
 of public building operations is due to the present policy, which provides 
 for the purchase of condemned or other property. The purchase price of 
 the land is in many cases exorbitant and this may make impossible an 
 average return on the capital invested. Cf. Report of the Land Enquiry 
 Committee, vol. ii, pp. 242 jf.
 
 414 THE TAXATION OF LAND VALUE 
 
 ments in municipal housing as have been attempted in 
 Germany and England are far from conclusive evidence of 
 the effect of total municipalization of land on rent and land 
 value. Were this extreme reform practicable, it is readily 
 conceivable how the public appropriation of land value 
 might benefit the urban tenants, not alone in the better 
 utilization of the land, so as to relieve the congestion of 
 population, but also by expending the enormous value 
 increment of urban property which now accrues to private 
 individuals for public utilities and improvements. The 
 question resolves itself into one of practicability. 
 
 What does the municipalization of the land involve? 
 There are only two ways in which the community could 
 get possession, first, acquisition by purchase, or secondly, 
 confiscation. The first would unquestionably burden the 
 community with a debt too enormous to contemplate, so 
 that compensation for town land, except for new, recently 
 settled communities, is not feasible. As for the second 
 means, the confiscation of urban property, not only would 
 it inflict a severe loss uix)n a single class of the population, 
 but such a revolutionary measure would bring other conse- 
 quences that might disrupt the entire social system. 
 Moreover, society at present and for a long time to come 
 will not tolerate such a course; nor should it be advocated 
 in view of the present conceptions of justice and equality, 
 except in the direst need of the state. For a long time to 
 come, therefore, less drastic and more practicable measures 
 must be found to help solve the urban problem which must 
 be admitted to be grave and urgent. 
 
 From the tax on land value, however, little is to be 
 
 hoped in the way of a solution of the housing problem, 
 
 except as the supply of accommodations may be affected.^ 
 
 ^ One of the causes of the acute shortage of houses in England was, 
 according to the Land Enquiry Committee (see Report, vol. ii, p. 87), the 
 increased attractiveness of alternative investments. " New house prop- 
 erty, then, b decidedly less attractive as an investment than it was a few 
 years ago." Might not the untaxing of buildings remedy this?
 
 THE TAX AS A SOCIAL REFORM 415 
 
 Furthermore, the expediency of checking speculation in 
 urban land by means of a tax might be doubted, if it 
 were not for another consideration. 
 
 We have seen the inevitable upward trend of the value 
 of land in progressive cities. This tendency even public 
 ownership cannot prevent, except in so far as the un- 
 systematic, wasteful use of land under private ownership 
 and the screwing up of speculative values might cease. 
 But it has been asked, why should the increments due to 
 social influences accrue to private individuals? The need 
 for social and recreational centers, for parks and play 
 grounds, and other public utilities is increasing and these 
 in turn tend to increase the value of land. Why not set 
 aside these socially created values to meet the increasing 
 public expenditures? If the argument is advanced from 
 the standpoint of right or justice, the counter-argument is 
 equally valid, namely, that other value increments are 
 socially created and should be likewise appropriated for the 
 benefit of the whole community. From the standpoint of 
 expediency, however, in view of the foregoing reasons for 
 reform, an additional tax on land, which would give the 
 community a share in the increments accruing from land, is 
 winning adherents.^ 
 
 11. In the case of agricultural land we saw that 
 government ownership of the land was not expedient; in 
 the case of urban realty, the expediency of the method of 
 municipalization was questionable. Now, we ask, does the 
 need of conservation of natural resources necessitate their 
 appropriation by the state? The need of conservation in 
 the face of the wasting character of these resources has 
 abeady been discussed.^ The reports of the commissions on 
 conservation all agree that most nations have not acted 
 
 * Cf. Seligman, in Proceedings of National Tax Association (1914), 
 p. 191. 
 
 * Supra, chapter viii, 9. Cf. also Summary of the Commissioner of 
 Corporations on the Lumber Industry (February 13, 1911), part i.
 
 416 THE TAXATION OF LAND VALUE 
 
 very expediently in disposing of their forest and mineral 
 
 land. The following data show the percentage of forest 
 
 area under government ownership: ^ 
 
 Great Britain ; 2.2 per cent 
 
 Italy 4.0 " " 
 
 France 12.0 " " 
 
 United States (national and state) 18.9 " " 
 
 Norway .... 28,5 " " 
 
 ( imperial 31.9 ) 
 
 Germany < crown 1.8 > 49.8 " " 
 
 ( municipal 16.1 ) 
 
 Finland 61.2 " " 
 
 Spain 84.0 " " 
 
 Russia 87.3 " " 
 
 Recognizing the need of conserving at least the existent 
 forest land, for "forests exercise an influence on the water 
 supply, on agriculture and on the general health of the 
 people,"^ there is a general movement in European coun- 
 tries to add to the public forest reservations by purchase. 
 Since 1870 France has not only made no sale of forest land, 
 but has each year consigned more land to forestry. France 
 has spent nearly 200,000,000 francs in reforesting dunes 
 and devastated mountain sides. Germany likewise spent, 
 in the years 1867-95, over 22,000,000 marks in increasing 
 her forest domain.' This policy is now being followed by 
 Austria and Italy. The United States has only recently 
 been aroused to the problem of conservation. Yet in this 
 country, "in timber lands the tendency toward consolida- 
 tion is strong and has gone far toward placing control of 
 such lands in a few hands. It appears that the monopoly is 
 partly in the interest of economy in logging, milling and 
 manufacturing, but chiefly speculative." * The wasteful- 
 ness of our forestry system has already been pointed out.^ 
 
 The policy with regard to mines is not different. While 
 the German States and France find it profitable not only to 
 
 ' Report of the National Conservation Commission (1909), vol. ii, pp. 
 280, 345. 
 
 ' Ibid., p. 281. * Adams, Science of Finance, pp. 244-45. 
 
 * Report of the National Conservation Commission (1909), vol. i, p. 85. 
 
 * Supra, chapter viii, 9.
 
 THE TAX AS A SOCIAL REFORM 417 
 
 own but also to operate the mines, England and the 
 United States have disposed of most of their mineral land. 
 Moreover, the tendency of concentration in mine holdings 
 is evident in this country. Especially is this true of the iron 
 mines which is explained by the greater economy of large 
 operations. In oil lands this tendency toward concentra- 
 tion is said to be apparently slight, while in coal lands it is 
 intermediate.^ 
 
 Now that these important resources have been disposed 
 of by the government, the question of the expediency of 
 repurchasing them arises. To devote a certain sum 
 annually to the repurchase of natural resources as the 
 European countries are doing, is a far different matter than 
 either purchasing or confiscating all the land. Moreover, 
 the operation of mines and forests is different from agri- 
 cultural production. Especially is this true of forests. The 
 forests under state management in Germany are said to 
 yield considerably greater returns than those under private 
 ownership; ^ the protection against waste and fires can be 
 better undertaken by publicly trained officials than by the 
 absentee speculator. But while the nature of forest cultiva- 
 tion permits of public ownership, the efficiency of govern- 
 ment operation of the mines as compared with private 
 enterprise is doubtful. Yet a few government-owned mines 
 operated whenever the private monopolist unwarrantably 
 raises the price of the mineral, or always operated in compe- 
 tition with the privately owned mines, might be highly 
 advantageous to the consumer. Again we say, unless a 
 sufficient amount of government control can be exercised 
 to prevent the enormous waste and to break up the monop- 
 oly (the tendency toward the monoply of natural resources 
 is well established ^), public ownership through the policy 
 of repurchase might be found expedient and feasible. 
 
 * Report of the National Conservation Commission, vol. i, pp. 84-85. 
 Ibid., vol. ir, p. 388. 
 
 Cf. Summary of Report . . . on Lumber Industry (1911), vol. i, pp. 6-8.
 
 418 THE TAXATION OF LAND VALUE 
 
 In the case of forest and mineral land, the taxing 
 authority must be governed by other considerations than 
 the withholding of the land from use. To promote the 
 conservation of forests, the levy should be such as to 
 encourage reforestation, at the same time that it prevents 
 a combination of owners of timber land from limiting and 
 controlling the supply with the purpose of keeping prices 
 high. A heavy annual tax on the value of the land only will 
 not tend to encourage forest reserves; and yet, if assessed 
 by expert valuers and uniformly, it would be an improve- 
 ment over the present system which taxes the value of the 
 trees under haphazard estimates of value. According to 
 an authority on forest taxation. Professor Fairchild,^ the 
 best tax is one based on the yield at the time the trees are 
 cut. This he thinks will encourage the growth of forests, 
 although his discussion discloses numerous difficulties 
 which the proposal involves. Some states, it must be noted, 
 have even subsidized the owners of forests in the interest of 
 conservation, instead of taxing them. Which, then, is the 
 most expedient method? There seems to be one system, 
 which without injury to the lumber industry in any way, 
 and while aiding the conservation of forests, would yet 
 secure to the state a share of the landowner's profits. That 
 method is the taxation of the value increment at the time of 
 transfer of the property. This is on the supposition that 
 the value of the deforested land itseK would show an incre- 
 ment over the purchase price. ^ Taxation, however, will not 
 
 * Report of the National Conservation Commission (1909), vol. ii, pp. 
 615 ff. See also Proceedings of the Sixth Conference on State and Local 
 Taxation, pp. 371-93. 
 
 ^ The supposition is, however, borne out as a fact in the Summary 
 of the Report on the Lumber Industry, Pt. i, p. 87: " After all the timber has 
 been cut from the great private holdings the value of the land alone will 
 be enormous. Much of this cut-over land may be best adapted for new 
 growth, in which case there may be a continuing concentration of timber 
 ownership. A large part of the land, however, may be exceedingly valu- 
 able for agricultural purposes." 
 
 The system of assessment and collection of the tax could be modeled
 
 THE TAX AS A SOCIAL REFORM 419 
 
 solve the question of forest conservation. Only by the 
 efforts of the federal government in getting control of a 
 sufficient area on which to grow forests as the European 
 nations are doing, and in this way to compete with the 
 private holders of forest land can we hope that the concen- 
 tration and private control of timber land will be broken. 
 
 The case is somewhat different with mineral land. The 
 value of the mine, as of all land, depends upon a variety of 
 social causes; but it also depends upon the amount and 
 quality of the minerals it contains. Mines are for the most 
 part exhaustible, and the expense of mining increases the 
 deeper the veins are. For this reason the capital value of 
 mines is determined with difficulty. Because of this pecu- 
 liarity the new English duty calculates the capital value of 
 mines by capitalizing the rental on the basis of twelve and 
 a half years instead of at twenty or more as in the case of 
 other land. Nevertheless, an approximately accurate 
 valuation could be made of a working mine by following the 
 method of rental payments. In England it is customary 
 for the most part to lease the mine to an entrepreneur who 
 pays a "dead rent" for a certain amount of minerals 
 brought to the surface, and a royalty for the excess over 
 that quantity, allowing also for shortages. According to 
 Professor Marshall,^ "the royalty itself on a ton of coal, 
 when accurately adjusted represents that diminution in 
 the value of the mine, regarded as a source of wealth in the 
 future, which is caused by taking the ton out of nature's 
 storehouse." Granted that the economic rent could be thus 
 computed, this value could be found only when the mine 
 was being worked. To levy a tax on the value of mines, 
 therefore, some plan like the English duty must be 
 devised. 2 But a tax will not assure the conservation of this 
 
 after the English value-increment duty. In case of a corporation, for 
 example, the payment could be made every fifteen or more years. 
 
 ^ Principles of Economics (6th ed.), p. 439. 
 ' Cf . supra, chapter v, 10, 11.
 
 420 THE TAXATION OF LAND VALUE 
 
 class of land. To prevent the monopolization and waste 
 of mines, the opinion is current, only public ownership can 
 be effective enough. 
 
 12. Having shown the inadequacy of the tax on land 
 value seriously to check speculation, reduce rents, and 
 ameliorate housing conditions, it is needless to dwell long 
 on the further social benefits which have been loudly pro- 
 claimed. Thus, the tax it was claimed would affect in- 
 dustry and the general distribution of wealth. For the 
 exemption of improvements would encourage building 
 operations, and this stimulation in building would promote 
 not only the building trade, but other industries as well. 
 Not only would the employment of capital be aided by the 
 remission of the tax on improvements, but labor too would 
 experience a "boom"; the wages of building employees 
 would tend to rise, the demand for other commodities 
 would be enhanced, production in general would be stimu- 
 lated, leading to a cheapening of many commodities, 
 whereby the laborer as consumer would again benefit.* 
 In this way the simple reform of taxing the value of land 
 would have within itself the possibility of materially in- 
 fluencing the distribution of wealth, not only diverting 
 some of the value increment, now accruing to the landlord, 
 to the relief of the public budget, but uplifting the working 
 class through better housing, cheaper rents, higher wages, 
 lower prices. 
 
 Judging from our study, these hopes appear vain, on the 
 whole. The reason, perhaps, for the failure of the tax to 
 become a reform of wide-reaching influence lies in the harm- 
 less nature of the change. It is unreasonable to expect that 
 a two or even three per cent tax on the value of land, or that 
 
 * The United Committee for the Tax on Land Values, Third Report, p. 64: 
 "^By the transfer of the burden of taxation on to Land Values production 
 would be increased and the price of commodities lowered; the conditions 
 of labor of all kinds would be improved; wages would be higher and 
 employment more regular, and the foundation would be laid of equitable 
 relations between man and man."
 
 THE TAX AS A SOCIAL REFORM 421 
 
 the remission of such a rate on improvements would, in oup 
 complex social system of interacting forces, bring forth the 
 millenium. Nevertheless, as a fiscal measure, its influence 
 towards reform, its tendency to check speculation in land, 
 to relieve congestion, to appropriate some of the value 
 increment for public purposes, and thus to relieve the 
 burden to some extent from industry, outweigh the charge 
 of discrimination against the landowning class, involved in 
 the proposal to put a higher tax on them than they had 
 anticipated at the time of their investment.^ Not as a 
 panacea, then, for all social evils and economic mal- 
 adjustment, although its influence may be beneficial with 
 regard to these, but as a tax must the expediency of the 
 tax on land value be determined. 
 
 * "I have never been able to understand," says Seligman, "why a man 
 who has invested in land should be exposed to the danger of having a part 
 of his property taken away from him? When he invested his money in land 
 it was on the basis of the accepted policy of social justice, that private 
 property in land was to be treated like private property in other things." 
 (The Survey, March 7, 1914, p. 700.) A student of the changes that have 
 recently taken place in the policy of legislation should no longer wonder 
 that the accepted policy of social justice is not permanent. The end, which 
 is in this case social welfare, justifies the means.
 
 CHAPTER X 
 
 EXPEDIENCY OP THE TAX ON LAND VALUE FOR 
 THE UNITED STATES 
 
 1. The inadequacy of the tax on land value as an 
 effective means of reforming the social evils discussed in 
 the preceding chapters reduces the consideration of the 
 adoption of the tax to its expediency as a fiscal measure. 
 The expediency of introducing a new tax must be deter- 
 mined: (1) by the need of an additional source of public 
 revenue; or (2) by the efficiency or inefficiency of the exist- 
 ing system; or (3) by the special advantages of the pro- 
 posed change. But even though by these criteria condi- 
 tions were favorable to the adoption of a new tax, the 
 opposition of interested parties, the conservatism of 
 public opinion, as well as the constitutional barriers, would 
 have to be reckoned with and overcome. What, then, is 
 the situation in this country with regard to the new tax? 
 
 If proof were needed of the deep concern that problems 
 of taxation are giving public officials as well as fiscal au- 
 thorities, their interest in the conferences of the Inter- 
 national Tax Association and the activity of the different 
 state legislatures in creating tax commissions within recent 
 years should be noted. The primary cause of this concern 
 is the necessity of covering the ever-increasing budgets 
 with revenue from the old and inadequate sources. This 
 need does not appear in the budget of our national govern- 
 ment which is supported adequately by excise and tariff 
 duties, and by income and corporation taxes, nor in that 
 of the state governments, whose expenditures even tend to 
 decrease per capita of the population. The greatest fiscal 
 need, as will be shown in the following section, is to be 
 found within the local bodies whose rapidly growing ex-
 
 LAND-VALUE TAX IN UNITED STATES 423 
 
 penditures must be met almost wholly from the selfsame 
 sources. 
 
 A second cause of the mterest which tax questions are 
 arousing is the inequality of burden, and the general de- 
 fectiveness of the existing systems of taxation. But the 
 dissatisfaction is directed chiefly against the operation of 
 the general property tax. And inasmuch as the local gov- 
 ernments in this country rely almost exclusively on the 
 general property tax for their revenue, the most needed 
 reform is in local taxation. 
 
 Coming now to the tax on land value, the more fruitful 
 and opportune inquiry will be concerned with its expedi- 
 ency as a local tax. This position is all the more justified, 
 when we consider that the tax is best adapted for local 
 purposes, if revenue be the object sought. Fiscally, both 
 the German "Zuwachssteuer" and the English increment 
 duties were found to be disappointing. Moreover, these 
 indirect levies are the forms of the tax better suited for 
 state and federal purposes. In this country, however, the 
 conditions of landed monopoly are lacking which made 
 progressive and increment taxes expedient in the other 
 countries studied. Only with regard to forest taxation 
 can the value-increment tax be considered for American 
 conditions. Here too, however, conservation, rather than 
 fiscal expediency, is the purpose to be held in view. On 
 the other hand, to levy a proportional, direct tax on land 
 value for federal or state purposes would be impracticable; 
 it would be not only superfluous, but also against the recent 
 tendency toward separation of the sources of revenue.^ 
 The choice, therefore, lies between the local increment and 
 direct forms of the tax. The practicability of the increment 
 tax for our municipalities is problematical. First, it is 
 more discriminatory and less productive, i.e., it is less 
 fiscal in character. Secondly, it is unprecedented in 
 method of assessment. Thirdly, its administration presents 
 Infra, 6. 
 
 * 
 
 A,
 
 424 
 
 THE TAXATION OF LAND VALUE 
 
 serious difficulties.^ The adoption of the tax, if at all 
 expedient, should, then, be for local purposes; the form of 
 levy, the direct, proportional tax, such as we found it in 
 the Australasian and Canadian municipalities. 
 
 With the inquiry thus limited, let us test the expediency 
 of the tax on land value, in the light of the needs of the 
 local governments, and the problems centering in local 
 taxation. 
 
 2. The tendency of local (including county) expendi- 
 ture to increase is evident from the following table: 
 
 TABLE SHOWING THE GROWTH OF TOTAL AND PER 
 CAPITA EXPENDITURE BY LOCAL AUTHORITIES IN 
 THE UNITED STATES* 
 
 Year 
 
 Cities, villages, totimships, 
 school districts 
 
 Counties, cities, villages, 
 townships, school districts 
 
 Expenditures 
 
 Per capita 
 
 Expenditures 
 
 Per capita 
 
 1870 
 
 1880 
 
 1890 
 
 1902 
 
 $328,244,520 
 724,427,848 
 780,941,558 
 
 1,433,505,091 
 
 $8.51 
 14.44 
 12.47 
 18.24 
 
 $575,810,060 
 
 848,532,875 
 
 1,025,989,603 
 
 1,630,069,610 
 
 $13.38 
 16.91 
 14.79 
 20.74 
 
 * Adapted from table in State and Local Taxation, Second Conference (1908), p. 519. 
 
 The enormous increase in the outlays of the govern- 
 ment in some of the largest municipalities in the coun- 
 try is seen from the tables on the opposite page. 
 
 In comparing the per capita expenditures in 1890 
 and 1912 as shown in the table, it should be borne in 
 mind that the data for 1912 included interest on loan 
 investments, and that there may be further discrepan- 
 cies due to the change in classification by the Census 
 Bureau. 
 
 One cause of the need for additional taxes is likewise seen 
 
 Cf. infra, footnote p. 458,
 
 LAND-VALUE TAX IN UNITED STATES 425 
 INCREASE IN EXPENDITURES IN LARGE CITIES, 1900-1910 
 
 City 
 
 1900 
 
 1910 
 
 Percentage of 
 increaae 
 
 New York 
 
 $185,881,409 
 
 30,141,134 
 
 30,625.246 
 
 28,959,312 
 
 8,953,106 
 
 6,967,419 
 
 1.068,544 
 
 $513,225,5551 
 50,878,547 
 47,750,049 
 33,237,816 t 
 16,322,348 
 18,014,574 
 4,644.659 
 
 176 
 
 
 68 
 
 Philadelphia 
 
 Boston 
 
 55 
 14 
 
 St. Louis 
 
 82 
 
 Buffalo 
 
 158 
 
 Atlanta! 
 
 334 
 
 
 
 Data taken from comptrollers' reports of these cities, 
 t Figure* are for 1911, not for 1910. 
 
 j The expenditures include both ordinary and extraordinary. The figures were taken 
 from BoHon Municipal Slatislics (Special Publications). 
 i Figures are for 1901 and 1911. 
 
 in the increased indebtedness which the municipalities tend 
 to assume. From over 27 millions in 1842, the indebted- 
 ness of the municipalities in the United States had grown 
 to over 328 millions in 1870, to nearly 707 millions in 1880, 
 to over 744 millions in 1890, and to over 1387 millions 
 in 1902.^ This enormous increase does not imply that the 
 debts are assumed in lieu of taxation; but it results that the 
 
 COMPARISON OF PER CAPITA EXPENDITURES IN 
 CERTAIN LARGE CITIES, 1890-1912* 
 
 Per capita 
 
 New 
 York 
 
 Chicago 
 
 Phila- 
 delphia 
 
 St. 
 Louis 
 
 Boston 
 
 PiUs- 
 burgh 
 
 San 
 Fran- 
 cisco 
 
 At- 
 lanta 
 
 1890: Expendi- 
 tures except 
 for loans and 
 investments. . . 
 
 1912: Net gov- 
 ernmental cost 
 payments 
 
 $24.56 
 46.29 
 
 $13.80 
 29.30 
 
 $13.10 
 26.49 
 
 $14.45 
 30.21 
 
 $32.63 
 43.39 
 
 $12.04 
 40.66 
 
 $18.86 
 43.34 
 
 $15.75 
 21.35 
 
 Extra Census Bulletin No. 70, United State* Cemu* (1894); Financial Statistic* of 
 Cilie* (1912), p. 74. 
 
 interest on these enormous amounts must be met by taxa- 
 tion, thus adding another considerable item to the budget. 
 
 ^ United Statet Cermu (Special Report) Wealth, Debt and Taxation 
 (1907). p. 131.
 
 426 
 
 THE TAXATION OF LAND VALUE 
 
 The socializing tendencies of modem communities, more- 
 over, give assurance of the permanence in the trend to- 
 ward increasing public expenditure. Unlike the growth in 
 the outlays of the federal government, due largely to the 
 army, navy, and pension expenditures,^ that of the muni- 
 cipalities is attributable to the developmental needs of 
 government rather than to the protective. ^ The congrega- 
 tion of population in cities following upon the so-called 
 industrial revolution, and the other changes denoted as 
 progress, have made social problems out of what, less than 
 a century ago and to this day in certain remote, rural 
 communities, are considered matters primarily of individ- 
 ual concern, e.g., the education of the young, hygienic con- 
 ditions of the home and neighborhood, etc. The depart- 
 ments of public education, health, public utilities, public 
 charities and recreation, as well as the police and fire 
 departments demand larger appropriations. The following 
 statistics regarding recreation and educational expendi- 
 tures in certain large cities are worth noting: ' 
 
 
 Expenditures for recreation 
 
 Expenditure! for education and lihrariet 
 
 Citji 
 
 1903 
 
 1912 
 
 Percent 
 
 . '4 
 \ncrea*e 
 
 1903 
 
 191S 
 
 Percent 
 increase 
 
 New York... 
 
 Chicago 
 
 Philadelphia 
 
 St. Louis 
 
 Boston 
 
 $1,516,057 
 
 1,046,799 
 
 561,308 
 
 160.280 
 
 556,221 
 
 $4,099,728 
 
 2,828,816 
 
 934,568 
 
 391,555 
 
 1,338,939 
 
 170 
 170 
 66 
 144 
 140 
 
 $22,923,375 
 6,703,217 
 4,522,054 
 2.083,054 
 3,868,378 
 
 $35,903,197 
 10.719,484 
 6,444.380 
 3,488.917 
 5,296,073 
 
 56 
 50 
 42 
 67 
 37 
 
 * Professor Bullock shows that, deducting the expenses for pensions 
 and army, the per capita expenses of the nation would not have increased 
 at all during the decade 1886-97. Cf. Political Science Quarterly, vol. 
 xviir, p. 104. 
 
 * Terms used by H. C. Adams {Public Finance) to differentiate the 
 functions of government that uplift and further the social well-being by 
 promoting education, sanitation, public improvements, and public 
 utilities, from the protective functions which serve merely to defend life 
 and property. 
 
 * Financial Statistics of Cities (1912), Table xn; United States Census 
 Report. Bulletin No. J20 (1902-03), Table xxi.
 
 LAND-VALUE TAX IN UNITED STATES 427 
 
 In view of the increasing population in urban centers 
 and the simultaneously increasing value of property and 
 income, the above percentages of increase in expenditure 
 may not seem extraordinary. The fact is, however, that 
 the budgetary requirements outrun not only the growth of 
 population, as shown by the higher per capita expenditure, 
 but outrun also the increase in the assessed value of 
 property.^ And if the "social service" functions of govern- 
 ment, as it now appears, continue to increase, the need of 
 more sources of revenue will likewise continue. 
 
 3. Further to emphasize the fiscal needs of the local 
 governments, to which our inquiry is confined, it will be y\ 
 necessary merely to show the inadequacy of the general 
 property tax which constitutes the prevailing source of 
 local revenue in this country. Legally both real and per- 
 sonal property are taxable and both are assessable at their 
 full value. The impracticability of this system, which at 
 one time was almost universally prevalent, has led to its 
 abandonment in almost all countries. And now this country 
 too is waking up to the realization that property is no 
 suflBcient test of the taxpayer's ability to contribute to the ; 
 support of government; and that the administrative 
 difficulties in assessing personalty equitably are well-nigh 
 insuperable. 2 So glaring are the inequalities of burden 
 which the tax occasions, that even under the most efficient 
 tax administrations little attempt is made to comply with 
 the provision of the law in assessing personalty. 
 
 The effect of this inefficient system of taxation has been 
 
 ^ Cf. Gephart, "The Growth of State and Local Expenditure," in 
 Second Conference of the International Tax Association on State and Local 
 Taxation (1908), p. 624. 
 
 * There are, nevertheless, a few advocates of the general property tax 
 who believe a graded property tax, with a low rate on certain kinds of 
 personalty would be a productive source of revenue. It is true that, as 
 in Baltimore and Pennsylvania, a low rate will result in an increased 
 assessment of intangible personalty. It is in vain to expect, however, that 
 under a system of self-assessment, which is alone practicable, an equality 
 of burden will result.
 
 428 THE TAXATION OV LAND VALUE 
 
 to shift the mam burden to real property. This will readily 
 be seen from the fact that, taking the country as a whole, ^ 
 in 1902, the assessed value of real estate was 78 per cent, 
 of personalty only 22 per cent. In the city of New York, 
 personal property contributed 35 per cent of the taxes in 
 1865, 29 per cent in 1870, 15.5 per cent in 1899, 12.5 
 per cent in 1903, and only 3.9 per cent in 1913.* In the 
 State of Minnesota, of a total assessment of over a billion 
 dollars, 84 per cent was on real and only 16 per cent was on 
 personal property.' 
 
 In view of this circumstance it is interesting to inquire 
 how real estate can support this heavy burden, and why a 
 tax on realty arouses less complaint from the proprietors 
 than an equivalent tax on income, for example.* Unques- 
 tionably, the explanation lies in the facts that the value of 
 land tends to appreciate with the increase in the budget 
 demands, that the tax is capitalized and largely amortized, 
 and that the value of the property is generally under- 
 assessed. However necessary, therefore, fiscal authorities 
 may deem it to supplement the realty tax by other im- 
 posts,^ the relief of the landowner from a heavy burden is 
 not a justifiable ground for such action. 
 
 4. A further cause of disapproval of the general 
 property tax is the failure to assess real property at its full 
 
 1 United States Census (Special Report), Wealth, Debt and Taxation 
 (1907). Table viii. 
 
 2 Report of tfie Commissioner of Taxes and Assessment of the City of 
 New York (1913), pp. 90-91. Also, Purdy, Taxation of Personal Property, 
 p. 9. 
 
 Minnesota Tax Commission, Third Biennial Report (1912), p. 175. 
 
 * It must be remembered that a two per cent tax on selling value is 
 equivalent to a thirty to forty per cent tax on the income, depending on 
 the rate of interest. Where the land is undervalued, of course the tax is 
 less heavy. Complaints of this burdensome impost are voiced chiefly in 
 rural and village communities where land does not rise in value so rapidly, 
 if at all. 
 
 ' It is undoubtedly desirable that more than one class, that every 
 individual in fact, should contribute something toward the public 
 budget. Hence other taxes should supplement the realty tax.
 
 LAND-VALUE TAX IN UNITED STATES 429 
 
 value. In only seven commonwealths, Arizona, the District 
 of Columbia, Illinois, Iowa, Kentucky, New Hampshire, 
 and Vermont,^ does the law provide for assessment at less 
 than the actual value. In all the other states, with the 
 possible exception of certain cities in Massachusetts and 
 New York City, underassessment is the rule in spite of the 
 legal requirement. "The habit of undervaluation is one of 
 such long standing that in most assessment districts sets 
 or series of arbitrary valuations jof assessment 'purposes 
 have become established. ... As the years go by and the 
 assessor continues in office a local system of assessment is 
 developed that is more or less satisfactory to people who 
 give the matter any attention, in that they are assessed on 
 a minimum basis. The assessment thus made is usually 
 copied from year to year and the injustices and inequalities 
 therein existent are perpetuated." * 
 
 Underassessment in itself is not a serious evil. If the 
 assessed value is thereby less, the rate will be higher; the 
 burden, however, will not be greater. But the defect in the 
 property tax is the failure of uniformity of assessment as 
 between individual owners, between district and district, 
 between rural and city property, between county and 
 county. Such inequality in valuation causes one individ- 
 ual and one section to profit at the expense of another 
 individual and another section. For example, a congres- 
 sional report on the system of assessment in the District 
 
 * Arizona may assess property at seventy per cent for city purposes; 
 the District of Columbia, at two- thirds of appraised value; Illinois, at one- 
 fifth on all property (since changed to one-third); Iowa, at twenty-five 
 per cent; Kentucky, at seventy per cent; New Hampshire, at fifty cents 
 on $100; while Vermont is authorized to assess each $100 at $1. See 
 United States Census (Special Report), Wealth, Debt and Taxation (1907), 
 p. 628. To these states Minnesota must now be added. In 1912, the full 
 value assessment was relaxed, so that property subject to the general 
 property tax is assessed at forty per cent, while other classes of property 
 are assessed at varying percentages. Taxation and Reventie Systems of 
 State and Local Governments (1912), p. 124. 
 
 * First Biennial Report of the Minnesota Tax Commission (1908), 
 pp. 6, 8.
 
 4S0 THE TAXATION OF LAND VALUE 
 
 of Columbia declares that areas occupied by small homes 
 were assessed at sixty per cent of their true value, middle- 
 class houses at fifty per cent, fine residences at thirty per 
 cent, and suburban areas at twenty per cent of their 
 value. ^ Again, in the United States there are many 
 counties in which city and non-agricultural land (that 
 is, suburban land not platted, nor laid out in lots) is as- 
 sessed at a higher rate than farm property, and about as 
 many more counties in which the assessment on farm 
 property ^ is at a higher percentage of value than on urban 
 realty. 
 
 While this undervaluation may be accounted a matter 
 merely of administrative ineflBciency, there is a more 
 fundamental reason for its existence. So long as the assess- 
 ment is the basis for a state or coimty levy as well as for 
 municipal purposes, there will be a tendency for the local 
 assessor responsible to the local body to underestimate the 
 value of property in his district. "The departure from the 
 full value probably has its origin in an effort to place valua- 
 tions low enough to protect tax payers from paying more 
 than a just proportion of taxes levied by the higher politi- 
 cal organizations. When the departure is once made from 
 the full value, the tendency is constantly downward, for 
 the reason that the district assessments being made in- 
 dependently of each other, the districts which are assessed 
 at a higher ratio of the true value than the average will be 
 forced in the next assessment to a lower valuation in self- 
 protection. In cases of rapid changes in value either 
 advancing by reason of increase in population or business, 
 or decreasing from any cause the assessors will naturally 
 try to protect the interests of their constituents by quickly 
 recognizing any decrease in value, and by being correspond- 
 
 * Report on Assessment and Taxation of Real Estate in the District of 
 Columbia (1912, House, No. 1215), p. 5. 
 
 * United States Censxis (Special Report), Wealth, Debt and Taxation 
 (1907), p. 6.
 
 LAND-VALUE TAX IN UNITED STATES 431 
 
 ingly slow in recognizing an increase, and thus accelerate 
 the downward tendency." ^ 
 
 As for the inefficiency and incompetency of the assessor, 
 the fault lies with the present system under which, as an 
 elective official, the assessor becomes responsible to a local 
 constituency, and under which, too, the remuneration is 
 often insufficient to enable him to devote all his time to his 
 office. Until expert, civil service employees are engaged 
 to make the valuation, arbitrary guesswork, not scientific 
 accuracy, will continue to be the basis of realty assessment 
 in this country. 
 
 5. With regard both to the need for more revenue and 
 to the defects of the general property tax, there is general 
 agreement among fiscal authorities. It is also generally 
 admitted that the first step toward reform is to amend the 
 state constitutions so as to make changes in the tax system 
 possible. Flexibility in legislative powers, in view of the 
 evolution of social institutions, is essential; it is most 
 essential, too, in that very important function of govern- 
 ment, the taxing power. Yet there are only three states 
 (excluding the District of Columbia), Connecticut, New 
 York, and Rhode Island, that have no constitutional 
 restrictions upon the taxing power.'* In all but thirteen 
 states restrictions, more or less far-reaching, obstruct 
 reform in taxation. 
 
 To aboUsh the "uniform ad valorem system," the taxa- 
 tion of all kinds of property at the same rate, amendments 
 to the constitution are still required in most of the states.^ 
 
 ^ Somers, The Valuation of Real Estate for the Purpose of Taxation, 
 pp. 3-4. 
 
 * Cf. Proceedings of the Third International Conference on State and Local 
 Taxation (1909), p. 73. 
 
 * In spite of the difficulty of passing a constitutional amendment, about 
 a dozen states have succeeded in so doing and more are ready to follow 
 their example. The constitutions of Arizona and New Mexico now permit 
 of classification, while those of New Jersey, Vermont, Maryland, and 
 Iowa never prevented the classification of property. In Pennsylvania, 
 Idaho, Delaware, Virginia, Minnesota, Oklahoma, Iowa, Michigan,
 
 482 THE TAXATION OF LAND VALUE 
 
 The nature of the amendment can be seen from the pro- 
 vision in the Minnesota constitution (1906) that "taxes 
 shall be uniform upon the same class of subjects." ^ A 
 system of classification of property with varying rates for 
 each class is thus made possible. 
 
 With this obstruction to legislation removed, some of the 
 states have instituted changes in taxing personalty that are 
 productive of more revenue and distribute the burden 
 upon a larger proportion of the people. Thus, for example, 
 in Maryland, Pennsylvania and West Virginia, a mere 
 reduction in rate on certain forms of intangible property 
 has resulted in a larger return of personalty for taxation 
 than ever before. Other states, after classsifying the 
 different subjects included under personalty, have adopted 
 special taxes for each class. Thus, mortgages, bonds and 
 other forms of credit may now be subject to a recording or 
 registration tax payable once, that is, when the deed or 
 bond is recorded. In New York state the taxpayer is not 
 even required to make a return of his personal property.^ 
 Yet, through a system of classification of personalty, the 
 assessment of intangibles has increased.' 
 
 But even these special taxes have little to recommend 
 them, except that they are more practicable and less burden- 
 some than the old system of taxing personal property. As 
 for an equitable distribution of burden among the tax- 
 payers, objections may well be raised against these special 
 taxes, first, because the taxation of mortgages and bonds 
 generally involve double taxation, and secondly, because all 
 the personal property cannot be reached even when the 
 rate of tax is slight. While, therefore, many to whom 
 
 New Hampshire, New York, and Wisconsin the ad valorem principle has 
 been amended. Ibid. (1909), p. 73: (1911), pp. 56-58. 
 
 1 United States Census Report, Taxation and Revenue Systems of State 
 and Local Goternments (1912), p. 120. 
 
 Ibid., p. 162. 
 
 * See Report of Commissioners of Taxes ... in Neva York City (1913), 
 pp. 11, 102.
 
 LAND-VALUE TAX IN UNITED STATES 433 
 
 expediency is all-sufficient favor this change in method of 
 assessment, there are others who would prefer to see 
 certain forms of intangible property exempt altogether, 
 and other systems of taxation supersede the antiquated 
 general property levy. For the latter, then, classification of 
 property for purposes of taxation, although admittedly an 
 improvement, is not an adequate reform. 
 
 The substitution of other taxes for the personal property 
 tax would necessitate further amendment of the state con- 
 stitutions. Wisconsin has successfully substituted an in- 
 come tax,^ while in Canada, where the municipalities have 
 greater freedom of action in budgetary matters, business 
 and habitation as well as income taxes have largely re- 
 placed the old general property tax. Without entering into 
 the relative merits and defects of these imposts, it will be 
 generally admitted that each one could be made not only 
 more productive, but also more widely distributed than 
 the personal property tax. But like the modified per- 
 sonalty taxes discussed above,^ the income tax could still 
 be evaded, while the habitation, license, or business taxes 
 would fail to distribute the burden equally and equitably.' 
 
 6. Aside from the legal and economic difficulties in the 
 way of the elimination of the personal property tax in the 
 manner indicated above, there is evident in this country a 
 trend of tax policy which may make a state income, habita- 
 tion, or business tax together with the personalty tax, 
 unnecessary. This tendency is toward the separation of 
 the state from the local sources of taxation. Already in 
 ten states, California, Connecticut, Delaware, New Jersey, 
 New York, Ohio, Vermont, Pennsylvania, Wisconsin, and 
 West Virginia, the separation is more or less complete.* In 
 
 ^ See Fourth International Conference on State and Local Taxation 
 (1910), pp. 87/., also Census Report, op. cit., p. 261. 
 
 ' See supra, p. 432. 
 
 ' Cf. Fourth International Conference on State and Local Taxation 
 (1910), pp. 89, 90. 
 
 * In some of these states, as in New Jersey, subsidiary levies, as for
 
 484 THE TAXATION OF LAND VALUE 
 
 others, the dependence of the state upon the general prop- 
 erty tax is growing less.^ An analysis of the sources of 
 income for state purposes, moreover, confirms belief in 
 the continuance and further development of this practice. 
 
 These sources are public utility and other corporations, 
 inheritances, insurance companies, banks, express com- 
 panies, while some states derive large sums of revenue from 
 licenses, especially liquor licenses, from mortgages, bonds, 
 notes and other secured debts, and also from fees of various 
 kinds. The success of the levies on public utilities, corpora- 
 tions and on inheritances, and the recent unfriendly atti- 
 tude towards monopolies and large fortunes, especially 
 expressing itself in the improved methods of assessment, 
 will tend to make these sources of income more and more 
 productive. Thus the separation of state from local taxa- 
 tion will be furthered. 
 
 What will be the effects of this policy? First, according 
 to niany,^ separation presents the best remedy for the 
 underassessment of realty.^ This we saw * was one of the 
 defects of the present system of taxation. Secondly, it will 
 facilitate local option in taxation. At first sight the rela- 
 tion between separation of sources for state and local 
 revenue and local option seems remote. But when once the 
 
 schools, are the only taxes on general property. In Pennsylvania vehicles 
 and intangibles only are taxed for state purposes. In California and 
 Delaware the separation is complete. Cf. Census Report, Taxation and 
 Revenue Systems of State and Local Governments (1912). 
 
 ^ For example, Massachusetts, Oregon, and Minnesota derive a con- 
 siderable proportion of their revenue from other sources. Cf. Ibid.; also 
 Fifth Conference on State and Local Taxation (1911), p. 238. 
 
 * There are those who still hold that cooperation between state and 
 local authorities in assessment will solve the evil of underassessment. 
 Cf. Second Conference on State and Local Taxation (1908), pp. 113^. 
 
 * Another practicable remedy is the apportionment-by-expenditure 
 system. In 1901 this principle was embodied in an Act passed in Oregon, 
 but the reform was never put in practice, largely because of some defec- 
 tive features in the Act. Cf. ibid. (1911), pp. iSTff.; also Purdy, Local 
 Option in Taxation, p. 32. 
 
 * Supra, 4.
 
 LAND-VALUE TAX IN UNITED STATES 435 
 
 general property tax is relegated by the state to the local 
 authorities, the interest of the state in the local assess- 
 ments would diminish and there would therefore be less 
 incentive to oppose local option when the latter is de- 
 manded by the municipalities. 
 
 The problem of "home rule" in taxation is a serious 
 and vital one just now, first, because of the strong division 
 it has created among fiscal authorities, and secondly, 
 because of the far-reaching changes it may effect in taxa- 
 tion. That the municipalities desire local option in taxa- 
 tion is in harmony with democratic government; it is of a 
 piece with the general movement of cities to govern their 
 own affairs.^ And as was admitted in part by an opponent 
 of local option,^ cities like New York, Chicago, Phila- 
 delphia, etc., are commonwealths in themselves and may 
 well be left, within hmits, to govern themselves. The 
 special importance of freedom in taxation, furthermore, 
 grows out of the constitutional restrictions and the con- 
 servatism of the legislature. To await reform in taxation 
 through the slow legislative procedure is in many states 
 hopeless. Hence the demand for the initiative and referen- 
 dum and for local autonomy, or local option. The conse- 
 quences of this policy will be treated in the following 
 section. 
 
 7. Local option, it must be remembered, is but a 
 means for overcoming the inflexible framework of our 
 state and federal government, and the political interests 
 which thwart reform. It is, furthermore, a method of 
 adapting the laws to the prevailing variety of conditions. 
 Yet, although local autonomy sounds consistent with the 
 ideal of democracy, it has, just as too much liberty has, 
 great dangers. The history of the struggle in this country 
 
 * The agitation in Chicago to be given power to control the public 
 utilities corporations, etc., is an illustration of the same movement. 
 
 * Professor T. S. Adams in Fourth Oonjerence on State and Local Taxa* 
 Hon, p. 107 (footnote).
 
 436 THE TAXATION OF LAND VALUE 
 
 between state rights and centralization, and of the victory 
 of the latter is sufficient vindication of concentration of 
 authority. But as shown in our history there are limits to 
 this policy. Legislation that is state-wide, for example, is 
 apt to be more effective; nevertheless, in matters purely 
 local this rule has no force. And most large cities that are 
 without a liberal charter are often hampered in their de- 
 velopment through the indifference, ignorance, and self- 
 interest of legislators from remote sections of the state. 
 
 Admitting the desirabiUty of local autonomy in certain 
 matters, it may, nevertheless, be asked whether taxation is 
 a fit subject for local control. Surely not, when the state is 
 dependent upon the same sources of revenue; nor even if the 
 revenues were all for local purposes, would full power in 
 taxation be justified. We need only to call attention to the 
 evils growing out of the lack of uniformity among the 
 states under our present system and to the recent proposals 
 of inter-state comity, to reject the principle of local 
 autonomy in taxation. Moreover, because of the far- 
 reaching influences of taxation, and the general spirit of 
 rivalry which prevails among the local bodies, it would be 
 dangerous, it is held, to delegate to them full control of the 
 tax system. The power to exempt and discriminate against 
 certain classes of taxable objects might be employed by 
 the towns to attract industries away from other locaUties, 
 for example. The business chaos that might be expected to 
 ensue from such policies may well be imagined. 
 
 Local option, however, does not imply complete auton- 
 omy. To argue against the latter in opposing "local 
 option" is willfully to evade the issue. ^ The legislature is 
 
 ^ Professor Bullock points out the inconsistency of the Oregon refer- 
 endum for local option in taxation, to which was attached the provision 
 that no poll tax should be levied in Oregon. If the position of the present 
 writer is correct there is no inconsistency at all. What the people of 
 Oregon voted for was to empower the municipalities to exempt certain 
 kinds of property if they chose, at the same time that they were held 
 subject to other general state laws. See, Fifth Conference on State and 
 Local Taxation (1911), p. 287.
 
 LAND-VALUE TAX IN UNITED STATES 437 
 
 always well aware of, and the Act always specifies the 
 particular question, in this case, the particular tax or 
 subject in taxation which the municipahty may adopt or 
 reject. So with the local option provisions in New Zealand 
 and in Canada.^ The employment of local option is to give 
 the municipalities a choice of action, and often the power 
 to rescind this action goes with it. In this way local condi- 
 tions are taken into account. Both in New Zealand and in 
 western Canada a two-thirds vote is generally required to 
 carry a petition on a local option measure. The important 
 fact to notice, however, is that the legislature, moved by a 
 strong public opinion that a certain measure is desirable, 
 yields to what appears a harmless compromise. And this 
 concession will be all the more readily made as the separa- 
 tion of state from local taxation becomes complete. 
 
 Where, then, lies the danger in local option, which has 
 called forth such great opposition on the part of fiscal 
 authorities ?2 It is alleged to be the shortest route to the 
 Single Tax. Few would regret the abolition of the personal 
 property tax by the municipal bodies. But, if given the 
 power to exempt personal property, what if the munici- 
 pality should demand the power to exempt improvements 
 and to abolish all other taxes than the tax on realty? 
 Whether this fear is well founded and justified will appear 
 from a review of recent events. 
 
 There is unmistakably a movement in certain of our 
 states to seek local option in taxation. It accompanies the 
 propaganda for the initiative and referendum. The curious 
 thing, however, is that these radical propositions encounter 
 less opposition from the state legislatures than from the 
 people themselves. For example, the California amend- 
 
 * For example, in British Columbia the Municipal Act (Statutes, 1892, 
 sec. 148) granted power to municipalities to pass by-laws for assessing 
 improvements not in excess of fifty per cent of their actual cash value, or 
 to exempt all improvements from taxation. 
 
 Cf. Conferences on State and Local Taxation (1907), pp. 515/.; (1911), 
 pp. 271Jf.
 
 438 THE TAXATION OF LAND VALUE 
 
 ment empowering "any county, city and county, city or 
 town to exempt from taxation for local purposes in whole 
 or in part, any one or more of the following classes of 
 property,"^ etc., passed both houses of the legislature in 
 1912 only to be defeated by the popular vote in November, 
 1914. In Oregon, it is said, the local option amendment to 
 the constitution was adopted ^ in 1910 chiefly because of 
 the provision for the abolition of the poll tax.' The meas- 
 ure accomplished nothing, since the power to regulate 
 taxation and exemptions, according to the amendment, 
 was "subject to any general law which may be hereafter 
 enacted." But this amendment was subsequently repealed, 
 with the exception of the clause prohibiting the levy of a 
 poll tax.* The conservatism of the general public is further 
 evidenced by the defeat in three counties of Oregon, 
 Clackamas, Multnomah and Coos, of a proposal of the 
 Graduated Specific Tax Exemption League (a Single Tax 
 body) to levy a graduated supertax on land value exceed- 
 ing $10,000 in a single holding. Another proposal for the 
 adoption of the Single Tax for local purposes also met 
 defeat.^ At the same time, the following amendment to the 
 Wisconsin constitution was passed in 1913 by both houses 
 of the legislature:^ "The legislature shall have power to 
 
 * These classes were: improvements in, on, and over land; shipping; 
 household furniture; live-stock; merchandise; machinery; tools, farming 
 implements; vehicles; other personal property except franchises. See 
 The Public, May 23, 1913, p. 492; also New York Tax Reform Associa- 
 tion, pamphlet No. 552 (1914). 
 
 ' Sixth Annual Conference on State and Local Taxation (1912), pp. 47- 
 48; (1911), pp. 245 ff. The vote stood 44,171 for, and 42,127 against, 
 with 33,950 not votmg. {Ibid., p. 248.) 
 
 Ibid., p. 249. 
 
 * Art. IX, la. See Census Report, Taxation and Revenue Systems 
 (1912), p. 191. 
 
 Cf. The Public, October 25, 1912, p. 1010; December 11, 1914. 
 p. 1184. 
 
 * To become a part of the constitution, this proposed amendment had to 
 be readopted by the next legislature before it could be put to a popular vote. 
 Cf. ibid.. May 30, 1913. In view of the recent defeat of the progressive
 
 LAND-VALUE TAX IN UNITED STATES 439 
 
 authorize counties, towns, cities and villages, by a vote of 
 the electors therein, to exempt from taxation, in whole or in 
 part, designated classes of property, including the build- 
 ings and improvements on land, but not the land itself; 
 but the value of such exempt property shall be included in 
 the assessment and equalization for State and county 
 taxes." Nothing more has been done with it, however. 
 
 This evidence of recent legislation would tend to in- 
 dicate that there is not much reason to fear the popular 
 judgment of the American people even in matters of taxa- 
 tion. Indeed, that the initiative petitions for local option 
 have aroused the interest and general intelligence of the 
 people in one of the most important of civic questions has 
 in itself been a most wholesome influence.^ In view of the 
 present defective system of taxation and the many dif- 
 ficulties under which our society is laboring to improve the 
 system, there is to many no more hopeful outlook than this 
 movement toward "restricted" local option in taxation.^ 
 
 8. Whatever direction reform in local taxation may 
 take in this country, it may be confidently assumed that 
 real estate will continue to constitute the most substantial 
 source of revenue. The first and most essential step, there- 
 fore, must be to eliminate the defects in that system of 
 
 party in Wisconsin (November, 1914) there is little hope for the adoption 
 of the amendment. 
 
 * See Fifth Conference on State and Local Taxation (1911), p. 251. 
 
 * It is significant that the opposition to "home rule" in taxation has 
 been awakened by the attempts of the Single Taxers to use local op- 
 tion as a means to submit their doctrines to a popular vote. In 1907, 
 the National Tax Association adopted without much opposition the 
 following resolution: "That state and local systems should be so far 
 divorced that by general laws the appropriate local governing bodies may, 
 if deemed expedient, be granted certain limited and carefully prescribed 
 powers over the licensing of occupations and the selection of subjects of 
 local taxation and the rate of assessment upon such subjects." At the 
 fifth conference of the Association, in 1911, on account of the diversity of 
 opinion among the members that had arisen since 1907 on the question of 
 local option, the above-quoted resolution was withdrawn. Cf. Proceeding* 
 of the Fifth National Conference (1911), pp. 4SJ5 jf.
 
 440 THE TAXATION OF LAND VALUE 
 
 taxation, which are chiefly administrative. The importance 
 of a more eJBBcient system of valuation and assessment can 
 scarcely be exaggerated, since it would not only tend to 
 equalize the burden of taxation, but would, in a great 
 measure, make special and additional taxes in our localities 
 unnecessary. Moreover, any proposed new tax will pre- 
 suppose a more expert method of administration than at 
 present employed. 
 
 Already a number of American municipalities have taken 
 action to improve the administration of the realty tax. 
 The movement in general is toward expert valuation of 
 property, toward full-value assessment, and toward an- 
 nual revaluation. What is meant by an expert, scientific 
 method of appraising real property has already been 
 described.^ The first requirement for a fairly accurate 
 system of valuation is the separation of the value of the 
 land from that of the improvements; the second is the 
 employment of maps and rules for relative values; the 
 third, good administrative machinery, trained valuers 
 holding office by civil service appointment and responsible 
 to a head taxing authority. 
 
 The progress already made in this country toward such 
 scientific valuation is a strong argument against the half- 
 way schemes to patch up the assessment roll which are 
 advocated in some states. The recent attempts by the 
 Tax Commissions of Wisconsin and Michigan to ascer- 
 tain the actual value of real property by a comparison 
 of a number of recorded sales with the assessed value of 
 the same property and under the untenable assumption 
 that the same discrepancy that existed between the sale 
 and assessed value in a relatively few cases will apply to 
 all property, 2 are futile and inadequate to overcome the 
 flagrant inequaUties in assessment. Even though the 
 assessed value of real property has by this method risen 
 
 * Supra, chapter vii, 13 Jf. 
 
 * Cf. Second Conference on State and Local Taxation (1908), pp. ISW/.
 
 LAND-VALUE TAX IN UNITED STATES 441 
 
 enormously, the process of attempting an equalization 
 of the admittedly incompetent original assessment, is 
 scarcely commendable. And added to this fundamental 
 defect is that arising from the fact that the recorded 
 values are often nominal and fallacious and that the 
 number of sales transactions in any one year are com- 
 paratively few. There remains, therefore, no doubt that 
 the more scientific and in the end more practicable method 
 of valuation is that endorsed by the committee of the 
 National Tax Association on Real Estate Assessment, and 
 practiced in New York City, a cadastral valuation based on 
 the principles already set forth. 
 
 The second change in our administrative system, namely, 
 full-value assessment, will automatically result from an 
 expert valuation. Whether underassessment is legally 
 required,^ or is the outcome of a defective system, it is to 
 be condemned. Enough reasons have already been given 
 elsewhere ^ in favor of full-value assessment. We repeat 
 that from a purely business standpoint its influence is most 
 favorable, since underassessment, even when uniform 
 (which is contrary to experience), means a higher tax rate.' 
 Yet a low rate will all the more readily attract residents and 
 business to a community. 
 
 As to annual assessments, inasmuch as it is the tendency 
 of land to fluctuate and especially to appreciate in value, 
 the valuation must be frequent enough to reflect such 
 fluctuations. And without a revaluation, even annual 
 assessments have proven ineffective. Already assessments 
 are made annually in twenty-four states for all taxing 
 
 * As in Illinois and several other states. 
 
 * See supra, 4. 
 
 * The recent reform in Ohio, the chief feature of which consisted in 
 adopting full-value assessment, has shown the value of the change. The 
 maximum rate limit for all local purposes in Ohio has been fixed at fifteen 
 mills, while in Chicago for practically the same purposes the tax rate for 
 1915 is about fifty mills. (In Chicago, however, property is legally assessed 
 at one-third of its actual value.)
 
 442 THE TAXATOIN OF LAND VALUE 
 
 purposes, and in seven more for local purposes only,* 
 thirty-one states in all. In most of these cases, however, 
 the assessment of the previous year with or without changes 
 is readopted for the current year. To be effective, then, 
 an annual revaluation of the property is necessary. 
 
 9. The need of administrative reform being generally 
 acknowledged, the more disputed question presents itself, 
 as to what new sources of revenue are available for local 
 purposes. Speaking generally, local tax reform tends to 
 take one or more of three forms : (1) the classified general 
 property tax, or (2) the realty tax supplemented by special 
 taxes on business, corporations, and possibly income, or 
 (3) the realty tax relegated exclusively to the local authori- 
 ties. The adoption of any one of these systems will require 
 in most states a constitutional amendment. The prefer- 
 ence, then, rests on the basis of relative expediency, for 
 opinion is divided with regard to the relative equity of the 
 proposed substitutes for the general property tax.^ 
 
 If there is some truth in the adage, "every old tax is 
 good, every new one bad," the introduction of new and 
 untried taxes into the local system in this country should 
 and probably will proceed slowly. The conservative tend- 
 ency toward reform in the United States bears out this 
 statement. For this reason the course of reform is greatly 
 in favor of the classified property tax which involves only 
 slight innovation. The classified property tax, moreover, 
 is preferred to the separation of the revenue sources of 
 state and local governments respectively, because of the 
 far-reaching consequences which the latter may involve. 
 Indeed, the opposition against separation seems to be 
 actuated by the fact that it will lead to local option, local 
 option to the tax on land value, and land- value taxation to 
 the Single Tax.' 
 
 1 United States Census (Special Report), Wealth, Debt, and Taxation 
 (1907), p. 627. 
 
 * See supra, 6, 6. 
 . * In reference to the experience of Pennsylvania and Maryland (see
 
 LAND-VALUE TAX IN UNITED STATES 443 
 
 Nevertheless, the expedient of dividing the revenue 
 sources between the state and local governments is making 
 progress.^ With the modern movement toward the levy of 
 specific taxes on public utility and other corporations, on 
 inheritance, insurance, and on mines for state purposes, 
 the separation of sources will grow more feasible. ^ In fact 
 the tendency is for separation to follow classification. 
 Iowa and Virginia exemplify this movement. In both of 
 these states classification is not restricted by the constitu- 
 tion, and departure from the uniform ad valorem property 
 tax has been tried. In 1913, an amendment passed the 
 legislature of Iowa, providing for a separation of the 
 sources of revenue.' In Virginia a partial ^ separation was 
 enacted in 1915. Another noteworthy enactment, a half- 
 way measure, perhaps, between classification and separa- 
 tion, is the plan adopted by Connecticut of apportioning 
 the state direct tax against the towns in proportion to 
 their revenue, instead of proportionately to their assessed 
 valuation.^ 
 
 The replacing of the personal property tax in our local 
 bodies by business and income taxes, as has been the devel- 
 
 supra, 4) with the classified property tax. Professor Bullock asks: "Is 
 it Dot possible that these commonwealths have found a practicable, if not 
 an ideal, method of removing the worst evils in American state and 
 location taxation? " See Second Conference on State and Local Taxation 
 (1908), p. 137. How much the inevitable movement toward local option 
 which Professor Bullock desires to ward off is responsible for the senti- 
 ment quoted above can only be surmised. 
 1 C/. supra, 6. 
 
 * The most serious objection to separation, the lack of elasticity of 
 the state system of taxation (c/. Seligman, Essays in Taxation (1913), 
 pp. S5Sf.), has not interfered with the method in Delaware, for example, 
 where it is of long standing. 
 
 * The amendment must be passed again in 1915, before it can be sub- 
 mitted to the people. Cf. New York Tax Reform Association, pamphlet 
 No. 647 (1913). 
 
 * Ibid., pamphlet No. 560 (1915). Partial separation, because realty is 
 relegated to the local bodies for all purposes, except for the school tax 
 rate of ten cents which is to remain a state levy. 
 
 Ihid. (1916). Cf. supra, p. 434, footnote 3. ,
 
 444 THE TAXATION OF LAND VALUE 
 
 opment in Canada, is for practical reasons remote. The 
 inexpediency of the business tax for large cities lies funda- 
 mentally in the diflSculty of finding a measure of even 
 relative uniformity to ensure equality of burden. The 
 experience with this tax even in the smaller communities 
 of Canada affords evidence of its defects. It is readily seen 
 that to make the actual rental the basis of levy is to inflict 
 an inordinate hardship upon the retail merchants, for 
 example, whose rental is comparatively higher on account 
 of the better location and size of their premises. In most 
 cases, therefore, floor space has superseded rental as the 
 unit of measure for the tax. But this has necessitated 
 generally an elaborate classification of the various busi- 
 nesses, with a variety of rates or assessed valuations of 
 the different classes. In Winnipeg, for example, where 
 both methods of assessment have been tried, there is dissat- 
 isfaction with the present system, which makes an assumed 
 rental the basis of assessment.^ The complications which 
 would arise in any large American city, from a classifica- 
 tion which must be more or less arbitrary, are alone a 
 suflBcient deterrent to the introduction of the business tax. 
 As for the local income tax, the diflBdence shown in this 
 country with regard to its levy even for state purposes,^ 
 and the inexpediency of taxing income locally, because 
 income is no longer local in character, argue strongly 
 against its introduction.' From the administrative stand- 
 point, therefore, the most feasible of the proposed new 
 taxes is perhaps the habitation tax. But because of its 
 "regressive" and its unprecedented character in American 
 communities its institution will probably depend upon the 
 
 * Cf. Haig, The Exemption of Improvements from Taxation in Canada 
 and the United States, pp. 22 ff. 
 
 * Only seven states have enacted income tax laws. Taxation and 
 Revenue Systems of State and Local Governments (1912), p. 10. 
 
 * The last objection would of course lose its force if the tax was admin- 
 istered by the state or central jurisdiction and the revenue apportioned 
 among the local governments.
 
 LAND-VALUE TAX IN UNITED STATES 445 
 
 urgency of the fiscal stress, and the effectiveness of the 
 other changes, namely, classification and separation, to 
 relieve the pressure of the growing budgets. 
 
 10. There is, however, one alternative method of 
 raising more revenue. That is to increase the tax on real 
 property. That the latter is already heavily burdened has 
 been shown above. ^ But the increase of burden would 
 occasion less opposition, were it not for the fact that the 
 charge falls as heavily on the tenant as on the landowner. 
 To raise the rate of impost is, therefore, to hinder building 
 operations and to aggravate the general condition of con- 
 gestion in urban communities. Hence the growing popu- 
 larity of the tax on land value. 
 
 The tax on land value is in reality, then, no new source 
 of revenue; the untaxing of buildings is intended rather to 
 free the way to put a heavier charge upon the land. To 
 the extent that this is confiscatory and too discriminatory 
 its adoption in this country is remote. In so far, however, 
 as the tax on land value involves the untaxing of buildings 
 without over-burdening the landowner its expediency will 
 appeal to the general public. Now, under what circum- 
 stances is the proposal in the latter sense feasible? 
 
 First, the relation of the separation of the state and local 
 sources of revenue to the tax on land value has been pointed 
 out. The dependence of the two reforms is reciprocal. 
 While the separation of sources tends to facilitate the 
 introduction of the tax on land value, the latter pre- 
 supposes and would be inexpedient without separation. 
 The reason is as follows: the exemption of improvements 
 from taxation would impose an unequal burden upon land 
 owners in rural and urban communities respectively. As a 
 matter of fact, since the relative value of the land and 
 improvements varies in the different counties, cities, vil- 
 lages, and rural districts, a state tax on land value, unless 
 apportioned among the local governments according to 
 * Supra, 3.
 
 446 THE TAXATION OF LAND VALUE 
 
 expenditure,^ would have no possibility of enactment. 
 For example, in Minnesota, the remission of the tax on 
 structures, according to the Tax Commissioner's estimate,^ 
 would necessitate an average increase in the tax rate of 
 12.6 per cent in the rural districts (where the land far 
 exceeds the improvements in value), and an increase of 
 103.75 per cent in the cities. It is evident how onerous such 
 an exemption of improvements would be, if a uniform rate 
 were struck for state purposes. 
 
 If, however, the municipalities should receive the quota 
 from the property tax now accruing to the state, the tax 
 rate under the new system could be reduced to that degree. 
 That the relief from separation will not be significant will 
 appear from the following considerations. In 1902, about 
 eleven per cent of the total receipts from the general prop- 
 erty tax in the country constituted the state levy.' But it 
 must be remembered that the exemption of personalty 
 which may be expected to accompany the proposal to 
 untax buildings will largely offset this source of relief. 
 Moreover, this relief will not apply to the states where 
 separation is now wholly, or approximately, in force. To 
 what degree separation will prevent an additional burden 
 from falling upon site value will depend upon the condi- 
 tions in the various communities. 
 
 For this reason, the desirability of local option has been 
 advocated. Aside from the unequal distribution of burden 
 upon rural and urban districts to be thereby obviated, 
 there is a further reason for local option. There are muni- 
 cipalities where the value of the land tends to increase 
 rapidly. These are the local bodies where the untaxing of 
 the buildings could be instituted without the imposition of 
 
 * Cf. Seligman, Essays in Taxation (1913), pp. 358 jf. 
 
 ' Third Biennial Report of the Minnesota Tax Commission, pp. 178-79. 
 
 * Taking the United States as a whole, 51.7 per cent of all the state 
 revenue in 1902 consisted of the general property tax yield. United States 
 Census (Special Report), Wealth, Debt, and Taxation (1907), p. 968.
 
 LAND-VALUE TAX IN UNITED STATES 447 
 
 a heavier burden on the land. And if there be a grain of 
 truth in the contention that the untaxing of buildings will 
 stimulate business and industry and attract population, 
 this tendency of rising land value will even be accelerated 
 to the advantage of the landowner. Here, indeed, we must 
 call attention to the fear expressed by some that under 
 local option the tax on land value might be employed by 
 municipalities as a means to attract business and popula- 
 tion from rival cities. Without denying the possibility of 
 misusing complete home rule in taxation, the argument 
 is, nevertheless, an admission of the wholesomeness and 
 expediency of the new system. The movement to exempt 
 machinery from taxation in American cities^ is dominated 
 by the same motive, namely, to attract and encourage 
 industry. And why should not a wholesome tax system, 
 or in fact any civic institution, be used as a bonus to out- 
 side industry, just as an endowment by leading citizens is 
 often used to lure an industry to a city? If business will 
 thrive better where improvements are not taxable, the 
 latter, if other considerations allow, might be exempted 
 with advantage. Least of all has the landlord great cause 
 to complain, for whatever enhances the industrial pros- 
 perity of the town causes his land to appreciate in value.* 
 A third consideration bearing upon the problem of the 
 untaxing of buildings without levying an excessive tax on 
 land arises from the underlying requirements of the new 
 
 * See infra, 12. 
 
 * It is interesting in this connection to show how readily the business 
 world and especially the realty operators respond to a reform which 
 promises to promote prosperity. This explains, perhaps, the great and 
 often favorable comment on the so-called Single Tax in realty journals, 
 such as the Real Estate Magazine. For example, there appeared in the 
 Wall Street Journal (May 14, 1914) an article in praise of the Houston 
 (Texas) Plan of Taxation because of its efiFect on "boosting" the town. 
 The plan is partially the tax on land value (see infra, 12). In view of 
 the agitation concerning the tax in New York City, however, the article 
 could not stand unassailed. Hence Allan Robinson's very effective 
 criticism of the Houston experiment in the Wall Street Journal of May 23, 
 1911.
 
 448 THE TAXATION OF LAND VALUE 
 
 system, namely full-value assessments and annual revalua- 
 tions. In view of the prevailing underassessment of real 
 property for taxing purposes, expert valuation and assess- 
 ment at full market value would swell the assessment 
 roll; and if revaluation were made frequently enough, pref- 
 erably annually, the increments of land value in urban 
 communities would also augment the proceeds of the tax. 
 
 Fourthly, it might be found expedient to reduce the rate 
 on buildings as compared with that on land, or to untax 
 buildings altogether, covering the deficit in revenue 
 through the levy of other taxes. If the choice lay between 
 the old realty tax and the new proposed additional tax 
 on habitation, business, or income, few would decide for 
 the latter, for the reasons already set forth. If, however, 
 the tax could be removed from buildings, by the substitu- 
 tion of special and franchise taxes, and of a more extended 
 licensing system, much could be said in favor of such 
 exemption. 
 
 11. Speaking generally, however, there are but few 
 municipalities in this country where the tax on land value 
 would not impose a heavier charge on the property- 
 holder than under the realty tax. The relative value of 
 land and buildings will determine the amount of added 
 burden. In general it may be said: (1) that there are few 
 urban and rural communities where, if the reform were 
 complete, an increase of one hundred per cent in the tax 
 rate would be necessary, since such an increase would 
 imply that the value of the improvements exceeds the 
 value of the land; (2) that there are only a few localities, 
 where the rise in land value, and the relatively greater 
 value of the land than the buildings would occasion no in- 
 crease in the tax rate; (3) that in the majority of local 
 governments, some advance in rate would be needed, the 
 increase varying from a few mills to one or two per cent.^ 
 
 * In the case of New York City, we estimated an increase in the tax 
 rate of over eleven mills. C/. supra, p. 343, footnote.
 
 LAND-VALUE TAX IN UNITED STATES 449 
 
 Again we must call attention to the fact that, in spite of 
 the higher tax rate, the landowner will not necessarily find 
 his tax bill higher. The distribution of the shifted charge 
 will fall unequally. A little reflection shows that the tax 
 on land value puts a premium upon improved land. The 
 proprietor, therefore, who has expended more on improve- 
 ments than on the value of the site, will profit at the ex- 
 pense of the owner of vacant property. Since the ground 
 owner in this country is in most cases the proprietor of the 
 improvements as well, it is evident that many of them 
 might be relieved by the change rather than burdened. 
 This assumes, however, that the proprietor is also the 
 occupier of the building, or that the remission of the tax on 
 buildings will not fall to the benefit of the tenant in re- 
 duced rents. ^ 
 
 Take New York City, for example.^ Less than six per 
 cent of the famiUes In Manhattan live in their own houses. 
 In the other four boroughs the percentage will of course be 
 much greater. Some of these owner-occupiers in Man- 
 hattan would probably enjoy a reduction in taxes; these 
 would comprise the owners of the finest residences in that 
 borough. The occupiers of the average single family house, 
 according to Dr. Haig, would find their tax bill increased, 
 because the value of the land in Manhattan is excessive as 
 compared with the cost of the ordinary dwelling house. 
 In the other boroughs, however, the owner of his residence 
 would generally have less taxes to pay. The relief accruing 
 to such owner, however, might be counterbalanced by the 
 reduced value of his property which is another probable 
 effect of the introduction of the tax. The last consideration 
 
 * Frictional forces, we have seen, may prevent the shifting from taking 
 place. 
 
 * Dr. Haig has worked out the probable distribution of burden that the 
 reduction of the tax on buildings by fifty per cent would occasion in 
 New York City. In this section we reproduce his conclusions. Cf. Haig, 
 Some Probable Effects of the Exemption oj Improvements from Taxation in 
 the City of New York, pp. 1S88 Jf .
 
 450 THE TAXATION OF LAND VALUE 
 
 does not seem important in the case of the home-owner 
 who in general may be expected to remain in possession. 
 
 In the case of the owners who let their houses the reduc- 
 tion of the tax on buildings should theoretically fall to the 
 profit of the tenant; but to the extent that friction will 
 hinder the transmission of the benefit, the remission of the 
 tax will rather relieve the landlord, provided the value of 
 the improvement on the land exceeds the average ratio 
 between the site and building values for the whole taxing 
 jurisdiction. Now, in New York City, where rented apart- 
 ments and houses are the rule, the landowner would find 
 his tax bill reduced or increased according to the value of 
 the improvements on the site. On the average the value of 
 the building tends to exceed the value of the land in the 
 three boroughs, Brooklyn, Bronx, and Richmond; for Man- 
 hattan and Queens the contrary is true. In the latter 
 borough the large number of vacant and undeveloped 
 parcels of land, in Manhattan the proportionately greater 
 land value, will increase the burden of the property holder. 
 "Houses in Manhattan would usually pay higher taxes 
 while those in other boroughs would pay lower ones. In 
 Manhattan the more expensive parcels in the samples 
 would receive decreases; in the Bronx the less expensive 
 ones. Tenements in one portion of Manhattan would pay 
 greater taxes while those in other sections would pay 
 smaller." ^ The important conclusion, as pointed out by 
 Dr. Haig, is this: In so far as indirect benefits may be ex- 
 pected to follow the new system and to raise the value 
 of the land, and in so far as the owner is the occupier or 
 user of improved property, he will gain; but as ground 
 owner he will have higher taxes to pay on his land. There- 
 fore, unless other changes in the tax system accompany the 
 untaxing of buildings, the landowner alone will be discrim- 
 inated against by the change. 
 
 12. Until recent years, the proposal of the tax on land 
 * Haig, The Exemption of Improvements, etc., p. 134.
 
 LAND-VALUE TAX IN UNITED STATES 451 
 
 value, confounded with the Single Tax, remained a dead 
 issue in this country. Only with the widespread reaction 
 against the existing system of taxation is the question 
 coming to the front. At this time, indeed, when the more 
 immediate and urgent tax measures are pressing for adop- 
 tion, the activity of the Single Taxers in the propaganda of 
 the tax on land value, insignificant as their organization is, 
 is noteworthy.^ Their advocacy of the tax on land value 
 is entirely opportunistic; that is, the Single Taxers view 
 the land-value tax as the entering wedge. It may well be, 
 however, that the Single Tax bugbear will retard rather 
 than promote the adoption of the tax on land value. 
 
 Nowhere in this country thus far has the attempt been 
 made to introduce the tax on land value in its entirety. 
 Most of the legislation which sought to exempt improve- 
 ments gradually has met with failure. Only a few instances 
 of success in introducing the partial exemption of improve- 
 ments are recorded as the following summary of the legis- 
 lation will make clear. 
 
 That attempts to introduce the tax should be made in 
 states having the initiative and referendum is not strange. 
 The reform was made part of the election campaigns in 
 Oregon, Washington, and Missouri, and the referendum 
 propaganda was assisted by the Joseph Fels Fund ^ organ- 
 ized for the promotion of Single Tax legislation in the 
 United States. The defeat of the measures in Oregon have 
 been mentioned.' In Washington it was no different. In 
 accordance with a constitutional amendment in that state, 
 cities are empowered to draft their own charters. In 1911, 
 
 * It is to the credit of the Single Taxers that, more consistent than 
 some of their opponents, they do not urge the immediate adoption of their 
 Utopian system in toto; but they are confident that the success of partial 
 exemption of improvements, full-value assessments, etc., will further 
 their complete system. 
 
 ' Mr. Fels contributed a sum equal to all the other contributions to the 
 Fund. Cf. Joseph Fels Fund Bulletin (1913). 
 
 * See supra, p. 438.
 
 452 THE TAXATION OF LAND VALUE 
 
 accordingly, an amendment to the city charter of Everett 
 was proposed and adopted providing for the exemption of 
 improvements for local purposes to the extent of twenty- 
 five per cent of their value in 1912 and 1913, to fifty 
 per cent in 1915, to seventy-five per cent in 1916 and their 
 total exemption thereafter.^ In spite of the afiirmative 
 vote, the city commission of Washington decided to 
 exclude the amendment from the new charter, but to 
 submit it as a supplementary proposal to the charter. 
 This amendment, submitted to a referendum vote in 
 March, 1912, was defeated. At the November election of 
 the same year, however, the proposal was carried in every 
 ward, the vote standing 4200 in favor to 2200 against.^ 
 The amendment to the Seattle charter fared differently. 
 Adopted by the city council in December, 1911, the 
 measure was submitted to the people the following March 
 only to be defeated by a vote of about 12,000 to 28,000. 
 Another proposal for the gradual exemption of improve- 
 ments introduced by Councilman Erickson met the same 
 fate as the first.' 
 
 In Missouri the attempt of the Equitable Taxation 
 League* and of the Civic League of St. Louis,^ in 1912, to 
 
 The Public, November 24, 1911, p. 1194; May 8, 1912, p. 422; 
 November 15, 1912, p. 1091. 
 
 * The fate of this measure is undecided. The oflBcials declaring it to be 
 unconstitutional have not put it in operation. Cf. Haig, The Exemption 
 of Improvements, etc., p. 258. 
 
 The Public, January 15, November 22, 1912; March 14, 1913. 
 
 * This league was instrumental in obtaining 80,000 signatures to the 
 initiative petition. See ibid., August 28, and July 12, 1912. 
 
 ' Report of the Municipal Finance and Taxation Committee of the Civic 
 League of St, Louis on the Taxation Amendments to the State Constitution 
 of Missouri to be submitted November, 1912. 
 
 Section 1 of the proposed amendment provided: that "all property 
 now subject to taxation shall be classified for purposes of taxation and for 
 exemption from taxation as follows: 
 
 " Class one shall include all personal property. All bonds and public 
 security of the State, and of the political subdivisions and municipalities 
 thereof, now or hereafter issued shall be exempt from all taxes and all per- 
 sonal property shall be exempt from all taxes, State and local, in the year
 
 LAND-VALUE TAX IN UNITED STATES 453 
 
 amend the constitution providing for the gradual exemp- 
 tion of improvements and the exemption of personal prop- 
 erty failed. After a vigorous campaign, the measure was 
 defeated by a large majority.^ 
 
 While this referendum and active propaganda terminated 
 in defeat, the first step toward the taxation of land value 
 has been taken by a few municipalities, without the 
 publicity of which we have just spoken. In Houston, 
 Texas, the tax commissioner, J. J. Pastoriza, a disciple of 
 Henry George, upon assuming office in 1911 decided to 
 introduce some changes. Texas is hampered by the con- 
 stitutional provision which requires uniformity in the 
 taxation of all property, tangible and intangible. Pastor- 
 iza's predecessors had violated this provision, and Pastoriza 
 decided that he would also, but in another way. First he 
 had the Somers' system of valuation introduced and then 
 fixed the assessment, so that land was assessed at its "fair" 
 value, '^ and improvements at twenty-five per cent of their 
 actual value, or cost of reproduction. Personal property 
 
 1914 and thereafter, provided that nothing in this amendment shall be 
 construed as limiting or denying the power of the State to tax any form 
 of franchise, privilege or inheritance. 
 
 " Class two shall include all improvements in or on lands, except 
 improvements in or on lands now exempt from taxation by law. In the 
 year 1914 and 1915, all property in class two shall be exempt from all 
 taxes. State and local, to the extent of one-fourth of the assessed value of 
 such property; in the years 1916 and 1917, to the extent of two-fourths; 
 in 1918 and 1919 to the extent of three-fourths; and in the year 1920 
 and thereafter, all property in class two shall be exempt from all taxes. 
 State and local; provided, however, that in the year 1914 and thereafter, 
 the improvements to the extent of $3000 in assessed value on the home- 
 stead of every householder or head of a family shall be exempt from all 
 taxes. State and local." The Public, November 1, 1912, pp. 1035-36. 
 
 ^ The amendment was opposed most strenuously by the agricultural 
 population of the state. CJ. The Public, September 13, and November 15, 
 1912, p. 1091. 
 
 * That is Pastoriza's statement. See The Public (February 20, 1914), 
 p. 179; (June 12, 1914), p. 557. Fair means about seventy per cent. 
 The buildings were assessed at thirty-three per cent of their value in 
 1912 and 1913, and at twenty-five per cent in 1914. Cf. Haig, The 
 Exemption of Improvements, etc., p. 244.
 
 4M THE TAXATION OF LAND VALUE 
 
 continued to be taxed, but no attempt was made to reach 
 it. Bank deposits, credits, and house furnishings were not 
 taxed. The reform consisted, therefore, in estabHshing an 
 expert and more equal valuation of the land, and in 
 reducing the rate on buildings to about 36 per cent of that 
 on land. 
 
 According to the Tax Commissioner ^ and the Single 
 Taxers, very noteworthy results have ensued. First, the 
 total assessments were raised from 64 million dollars in 
 1910 to 94 millions in 1912; and it is claimed that by this 
 change the tax rate had been reduced from $1.70 to $1.50. 
 As a result of the readjustment in valuation and assess- 
 ment over 5000 owners paid less taxes in 1912 than in 
 1910.^ Secondly, building operations have been enor- 
 mously stimulated. The number of building permits during 
 the first six months of 1912 showed an increase of 55 per 
 cent over the corresponding period in 1911.^ Thirdly, Mr. 
 Pastoriza claims that the partial exemption of improve- 
 ments has lowered house rents.* Fourthly, the general 
 
 ^ In spite of the agitation among his opponents, Mr. Pastoriza has been 
 twice reelected by a large majority. According to J. Pastoriza the 
 population of Houston since 1910 had increased by 25,000. (See Wall 
 Street Journal, May 14, 1914.) His friends set it even higher. (The 
 Public, January 9, 1914, p. 81.) 
 
 The Public, June 21, March 29, August 23, 1912. 
 
 Ibid., June 12, February 20, 1914. The reports of the building 
 insi)ectors present even a more favorable showing than the statement 
 quoted. The following shows the valuation of building permits before 
 and after the adoption of the Houston Plan. (Statement of financial 
 statistics furnished the writer by J. J. Pastoriza.) 
 
 Year Valuation Year Valuation 
 
 1910 $3,695,145 1913 $5,432,265 
 
 1911 3,685.468 1914 4,044,367 
 
 1912 5,142,352 1915 2,418,693 
 
 * These are his words: " The exemption of buildings from taxation to the 
 amount of seventy-five per cent of tneir value has had the effect to lower 
 rents, which is only another way of saying that it has raised wages. The 
 following is a short list of houses (there are many more) showing the 
 amount of reduction in rent since the Houston Plan of Taxation has been 
 in existence. The plan has caused many new houses to be erected, thus
 
 LAND-VALUE TAX IN UNITED STATES 455 
 
 progress of the city is thought to owe something to the 
 Houston Plan of Taxation.^ Statistics, indeed, bear out 
 the statements of Pastoriza, but they do not reveal the 
 cause of the remarkable progress made by Houston. The 
 popularity of this illegal reform, nevertheless, indicates its 
 general soundness.^ This interesting experiment has, how- 
 ever, been cut short by the recent court decision declar- 
 ing the method of taxation in Houston illegal.' 
 
 Another example of reform in the same direction was 
 the enactment of the Stein Bill * in Pennsylvania providing 
 for the gradual exemption of improvements from taxation 
 in second class cities, i.e., in Pittsburgh and Scranton. 
 Especially significant is this legislation for Pittsburgh, 
 
 creating competition and changing the condition which existed before 
 the Houston Plan of Taxation was inaugurated. Before that time there 
 were two or three tenants for every house that was newly built; as a result 
 house rent jumped to the skies. Now there is never more than one 
 tenant after a house when it is completed, and sometimes not that. The 
 result is that the owners of houses, being anxious to rent, have reduced 
 the rent until the revenue derived from improved property does not 
 exceed very much the interest which you can get for money in the open 
 market. I will ask if this is not a good thing for the people of our city? " 
 Quoted from The Public. June 12, 1914, p. 557. 
 
 * Allan Robinson, President of the Allied Real Estate Interests, 
 attempted to refute some of the claims of Pastoriza with regard to the 
 effects of the tax. {Wall Street Journal, May 23, 1914.) To the state- 
 ment that the bank deposits had increased in Houston about seven 
 millions of dollars from 1911 to 1912, Robinson quotes figures to prove 
 that other cities in Texas show similar gains. Taking all the facts into 
 consideration Houston does show remarkable progress for a city of its 
 size. 
 
 ' " The people have expressed themselves universally as being satis- 
 fied with the Houston Plan of Taxation, and I believe that if the matter 
 was submitted to a vote of the people, over 90 per cent of them would 
 vote in favor of it." (From Report of Tax Commissioner (1914), in City 
 Book of Houston, p. 97.) Although this estimate may be judged extrava- 
 gant, yet Mr. Pastoriza has been elected again and again on the platform 
 of retaining the illegal system he has introduced. Cf. Haig, The Exemp- 
 tion of Improvements, pp. 243, 251 ff. 
 
 * Decision rendered by Judge Read, of the Texas State District Court, 
 at Houston on March 2. The Public, March 12, 1915, p. 260. 
 
 * H.R. 967. Passed in May, 1913; approved May 15. Pennsylvania, 
 1913, No. 147.
 
 456 THE TAXATION OF LAND VALUE 
 
 where until 1911 property was assessed according to a 
 classification made in 1867, the land being divided into 
 three categories, agricultural, rural, and full city land.^ 
 The Act of 1913 provides that the assessment on buildings 
 shall be reduced to ninety per cent of their actual value the 
 first year, to be followed by a further reduction of ten per 
 cent every third year, until after fourteen years the exemp- 
 tion will be only fifty per cent. If not repealed, this legis- 
 lation may after a few years' operation serve as an object 
 lesson to other states. 
 
 A few more isolated instances where the principle of 
 exemption of improvements is in force could be mentioned, 
 as for example, Pueblo, Colo., and Modesto, Cal. The 
 latter is an irrigation district. A few more irrigation dis- 
 tricts in the San Joaquin Valley took advantage of the 
 California state law to pay for the irrigation projects by a 
 special assessment on land value. The results of the new 
 system there are said to be noteworthy. ^ In Pueblo, the 
 initiative petition to amend the city charter providing for 
 
 ^ The first kind paid one-third of the prevailing tax rate in the ward, 
 the second kind two-thirds, the last kind the full tax rate. With revalua- 
 tion of the land in a growing city like Pittsburgh, the effect of such a sys- 
 tem can readily be imagined. " Property for some distance along one side 
 of Center Avenue, and also along Fifth Avenue has been classed 'full,' 
 paying the full tax rate, while at the same time, that on the other side 
 of the street has paid but two-thirds of the rate" "it was found that 
 the low rates have been paid almost entirely by large 'agricultural' hold- 
 ings and expensive residence properties while the high rates have been 
 saddled upon small business realty, small residences, and congested 
 tenement neighborhoods." The Survey, July 1, 1911, pp. 477, 479. 
 
 This "fiscal anachronism" as some one has well called the system was 
 abolished in 1911, and in the same year the legislature passed an Act 
 exempting machinery from taxation in Pittsburgh and Scranton for 
 municipal purposes. It is claimed that Mayor Magee saw the possibility 
 of the tax in stimulating industry and therefore had the Canadian 
 system investigated. The Pittsburgh Civic League aided and supported 
 him. Cf. The Public, February 14, 1913, p. 151. In a pamphlet. An Act 
 to Promote Pittsburgh's Progress by Reducing the Tax Rate on Buildinga 
 forty per cent, examples were cited showing that the change would occasion 
 an increase in rate only from fifteen mills to eighteen mills. 
 
 The Public. February 27, 1914, pp. 205-06.
 
 LAND-VALUE TAX IN UNITED STATES 457 
 
 the partial reduction of the tax on buildings was adopted 
 November 5, 1913, by a majority of 540. In 1914, fifty 
 per cent of the value of realty improvements and buildings 
 was to be exempt; in 1915, ninety-nine per cent was to be 
 exempt for local purposes.^ After being in operation two 
 years, the measure was repealed on November 2, 1915. 
 The vote for adoption, in 1913, was 2711 for, and 2171 
 against; in 1915, the vote cast was larger, 3042 against, to 
 8255 for repeal." 
 
 In New York City two thus far unsuccessful attempts 
 have been made to tax land value. The movement is 
 the outcome chiefly of the agitation for better housing.' 
 The Congestion Commission of 1910 recommended a 
 decrease in tax rate on improvements and an increase of 
 the rate on land value. This recommendation was embod- 
 ied in the Herrick-Schaap Bill providing for the gradual 
 exemption of improvements to the extent of fifty per cent.* 
 The second proposal was the levy of a value-increment 
 tax. This tax was recommended by the Commission on 
 New Sources of City Revenue appointed by Mayor 
 Gaynor in 1911.^ Among other taxes advocated by this 
 Commission was an annual increment tax of one per cent 
 "to be perpetual upon all increments of land values as 
 shown by comparison with the assessed valuations of the 
 
 The Public, November 14, 1913, p. 1089; Haig, The Exemption of 
 Improvements, etc., p. 253. 
 The Public, November 19, 1915. p. 1122. 
 
 The housing exhibit held in New York City was an attempt to bring 
 home to the people the necessity of the proposed tax reform. CJ. The 
 Survey. March 15, 1913. 
 
 * Cf. Report of The New York City Commission on Congestion of Popu" 
 lotion (1911), p. 32. The Bill of 1915 proposed the untaxing of build- 
 ings gradually so that after a period of ten years the exemption would 
 be practically complete. 
 
 ' Report of the Commission on New Sources of City Revenue, City of New 
 York (1913), p. 6. The untaxing of buildings was again made the subject 
 of investigation by the Mayor's Committee on Taxation in New York 
 City in 1915. Cf. Find Report of the Committee on Taxation of the City 
 of New York (1916).
 
 458 THE TAXATION OF LAND VALUE 
 
 year 1912, and to be in addition to the general tax levied 
 upon all real estate." ^ 
 
 These few attempts to introduce the partial untaxing of 
 buildings may be classified into three general categories. 
 The Oregon, Washington, Colorado, and Missoui^ move- 
 ments were instigated largely by the Single Tax propa- 
 ganda. These states are a fertile ^il for agitation because 
 of the referendum possibilities. The Houston, Pittsburgh, 
 and Scranton experiments must be attributed rather to the 
 widespread tendency in this country to underassess im- 
 provements, machinery, etc. For example, in Minnesota 
 "a custom has been developed in the state of assessing 
 land and improvements at different percentages of actual 
 value. Especially is this true in the newer parts of the 
 state. The argument has been advanced that a heavy 
 assessment is a fine on improvements." ^ Under the pres- 
 ent defective system of assessment such illegal under- 
 valuation of improvements may be assumed to be general. 
 Moreover, the same trend is evident in the recent legal 
 exemption of machinery and tools from taxation in Pitts- 
 burgh and Scranton (1911) and more recently in Phila- 
 delphia (1915)."' The purpose in all such cases is probably 
 to lighten the burden on industry. The agitation in New 
 York, on the other hand, may be regarded as the out- 
 growth (1) of the housing reform movement, and (2) of 
 the search for new sources of revenue to- cover the colossal 
 budget.* 
 
 * In addition to what has been said in disapproval of a local increment 
 tax (see supra, 1), it must be pointed out that the great discontent in 
 New York City with the assessed values in recent years makes the above 
 proposal of an annual increment tax, at least until conditions in the 
 realty market change, very undesirable and inexpedient. If levied on the 
 occasion of sale as in Germany the computation of the increment would 
 be much simpler and the tax more equitable. 
 
 ' First Biennial Report of the Minnesota Tax Commission, p. 56. 
 Pennsylvania (1915), No. 346. 
 
 * The activity of the Society to Lower Rents has helped bring this 
 proposal before the various tax committees.
 
 LAND-VALUE TAX IN UNITED STATES 459 
 
 As yet, with the exception of a few isolated instances, 
 reform in local taxation in the United States is still in its 
 infancy. The prospect of the institution of the tax on land 
 value is, therefore, remote. The momentum of the agita- 
 tion to introduce the tax will quicken, however, as the fis- 
 cal exigencies of the cities assert themselves. But judging 
 from the conservatism displayed by the people with regard 
 to the referendum measures mentioned above, the adoption 
 of the tax on land value can only be the outgrowth of the 
 general fiscal reform movement, not the vindication of the 
 Single Tax doctrines. 
 
 THE END
 
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 BIBLIOGRAPHY 477 
 
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 1902. 
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 480 BIBLIOGRAPHY 
 
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 BIBLIOGRAPHY 481 
 
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 Royal Commission on Taxation. Synopsis of Report and Full 
 
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 Canadian Municipal Journal. Official Organ of the Union of 
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 City of Edmonton, Alberta. Ninth Annual Report to December, 
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 482 BIBLIOGRAPHY 
 
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 Harpell, J. J. Canadian National Economy. Toronto, 1911. 
 
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 Immigration Situation in Canada, The. Report of the U.S. Im- 
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 1910. 
 
 Land Values in Canada. Review of Business Conditions during 
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 Lawson, W. R. Canada and the Empire. Edinburgh and Lon- 
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 Lighthall, W. D. Canada, a Modern Nation. Montreal, 1904. 
 
 Municipal Government in Canada, ed. by S. M. Wickett. In 
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 Municipal World, The. Ontario, 1909-. 
 
 Nock, A. J. Why Nature's Way is Best. In American Magazine, 
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 Official Handbook of Alberta, An. Compiled under direction of 
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 Official Handbook of Information relating to the Dominion of 
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 Ordinances of North West Territories. Regina, 1894-. 
 
 Public Accounts of the Province of Saskatchewan, 1912. Regina, 
 
 1912. 
 Public Service Monthly, The. Regina, 1913. 
 
 Reports of Assessment Department, City of Montreal, for 1912 
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 Report on Strikes and Lockouts in Canada, 1901-12. Ottawa, 
 1913. 
 
 Report of the Ontario Assessment Commission, 1901. Toronto, 
 1901. 
 
 Report on Taxation of Improvements by Assessment Commis- 
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 BIBLIOGRAPHY 483 
 
 Revised Statutes of British Columbia, 1897, c. 179. 
 
 Revised Statutes of North West Territories, 1898. 
 
 Revised Statutes of Ontario, The. 2 vols., v. 2. Toronto, 1877. 
 
 Statistical Year Book of Canada. Ottawa, 1895-1910. 
 Statutes of the Western Provinces. 
 
 Vineberg, S. Provincial and Local Taxation in Canada. In 
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 Wade, F. C. Experiments with the Single Tax in Western Can- 
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 1914. 
 
 Wade, F. C. The Single-Tax Failure in Vancouver. (Letter to 
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 Wade, F. C. The Single Tax Humbug in Vancouver. (Letter to 
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 VI. References on Kiao-chau 
 
 Denkschrif t betreffend die Entwicklimg des Kiautschou-Gebiets. 
 Berlin, 1901-09. 
 
 Gaul, J. Finanzrecht der deutschen Schutzgebiete unter beson- 
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 Kobner, O. Einfilhrung in die Kolonialpolitik, pp. 191 j^. Jena, 
 1908. 
 
 Landordnung von Kiautschou, Die. In Jahrbuch der Bodenre- 
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 Preyer, O. E. Aus der Praxis der Landordnimg von Kiautschou. 
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 Schrameier, W. Die Landpolitik im Kiautschou gebiet. In Jahr- 
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 INDEX 
 
 Absenteeism, 6, 23, 30, 31, 58-59, 
 257-58, 268, 276, 291; definition. 
 89-40, 48, 321-22; eflfect of tax 
 on, 81. 
 
 Administration, in Australia, 62-67, 
 95; in Germany, 160-63; in Can- 
 ada, 274-77; in England, 234-38; 
 of property tax in United States, 
 431, 440-42. 
 
 Agricultural land, 195, 350; exempt 
 from increment tax, 215-16; val- 
 uation of, 243; expediency of tax 
 on, 344-45, 346, 409, 445-46; 
 values, 351-58; 368-69, 385. 
 
 Alberta, 18, 254, 255, 257, 260-61, 
 262-63, 265, 270-71, 289, 301. 
 
 Amortization, 13, 192; principle of, 
 315-17. 
 
 Annual value, 4 n 30, 36, 52, 70, 
 129, 195, 252, 320-22, 396. 
 
 Australasia, chaps, n, in; land ten- 
 ure, 6, 20-23, 30, 96/.; absentee- 
 
 , ism, 6, 23, 30, 31; finances, 26-28, 
 34; local government, 28, 29, 90 
 ff.\ building and housing condi- 
 tions, 107-15. 
 
 Australian state taxes, 41-42; char- 
 acteristics, 23-24, 34, 36/., 27- 
 28, 59-60; prevalence, 34; rate 
 of, 41-42; exemptions, 42-43, 
 103-05; assessment roll, 65-66; 
 publicity, 66; assessment, 68-69. 
 
 Benefit principle, 30, 49, 91, 122, 
 
 124, 141-43. 160, 251, 252, 269, 
 
 308, 326. 
 Berlin, rental tax, 123; transfer tax, 
 
 126; congestion, 138, 390-91. 
 British Columbia, 17, 254, 255, 
 
 257, 258-61, 262, 266, 270, 275, 
 
 301. 
 Building, effect of tax on, 107-12, 
 
 248-49, 292-96, 298-99, 311-15, 
 
 397-98, 399, 400, 402-03, 420. 
 Building regulations, ineScacy of, 
 
 393-94. 
 
 Building-site tax, in Bremen, 125, 
 128, 130; recommended by 
 Housing Committee, 197. 
 
 Business tax, 251, 271, 273, 444. :| 
 
 Calgary, 265, 273, 278, 282, 283, 
 286, 290, 293, 294, 297. 
 
 Canada, Western, 3, 6, 17-18; local 
 taxation, chap, vi; land tenure, 
 254-56; social conditions, 253, 
 292; municipal ownership, 269. 
 
 Canons of taxation, 322 /. 
 
 Capital value, tax on; definition, 
 70; 125, 128-29, 157, 223, 252. 
 317-18, 320-22. 
 
 Capitalization. See Amortization. 
 
 Classification of tax, 304-08. 
 
 Classified property tax, in Germany, 
 130; 431-32, 442, 443. 
 
 Cologne, 132-33 n., 164, 168, 170, 
 175, 181. 
 
 Commonwealth of Australia, fed- 
 eral tax, 17, 36, 55-59, 60; Labor 
 Party, 55-56; absenteeism, 56- 
 57, 58; leaseholds, 57; mortgages, 
 58; rate of tax, 58-59, 84-86; val- 
 uation, 76; revenue from tax, 83- 
 87; effect on holdings, 98-99. 
 
 Congestion, 108-10, 112-14, 120, 
 138, 385, 386, 388-91; no prob- 
 lem in Canada, 296; in Great 
 Britain, 390-91; in Berlin, 390- 
 91; causes of, 391-93; remedies 
 proposed, 410, 411-13, 414; rela- 
 tion to tax, 395/., 398, 399-400, 
 420. 
 
 Conservation of natural resources, 
 366-68, 370, 415-20; effect of tax 
 on, 418-20. 
 
 Cost of dollection, of federal tax, 86, 
 88; in New Zealand, 88, 95. 
 
 Differential rating, 90-91, 116-17, 
 
 345-46, 445-46. 
 Direct and indirect forma of tax. 
 
 7/., 210, 224.
 
 486 
 
 INDEX 
 
 Discriminatory tax, 2, 8-9, 25-26, 
 44, 66, 59-60, 86, 96, 103, 125, 
 196, 208-09, 223-24, 276, 279- 
 80, 290-91, 298, 303, 823, 329, 
 409, 445. 
 
 Disintegration of large estates, 96- 
 98, 249-50, 297-98, 404, 408-09. 
 
 Edmonton, 17-18, 265, 268, 270. 
 272, 273, 282-83, 285-86, 287, 
 290, 293, 294. 
 
 England, 3, 17; land-value duties, 
 chap, v; burden on landowners, 
 190-96; agricultural d^ression, 
 195; large holdings, 406-07; 
 Housing Acts, 411-13. 
 
 Evasion of tax, 99-100. 
 
 Everett, Washington, 451-52, 468. 
 
 Exemption of improvements, 40- 
 
 41, 253, 261, 262-66; causes of, 
 267-9, 271-73, 277-80, 445, 458; 
 principle underlying, 310-15, 
 396, 397; expediency of, 446-48. 
 
 Exemptions from tax, in Australia, 
 
 42, 43, 103-05; in Germany, 152- 
 65; 167-68; in England, 215-16, 
 219-21, 226-27. 
 
 Finance Act (1909-10), 190/., 207- 
 08, 210. 
 
 Fiscal adequacy of tax in Germany, 
 170-76, 423; in Kiao-chau, 188; 
 in Great Britain, 244-47, 423; in 
 Canada, 277/., 299; during de- 
 pression, 284-89; 327-30. 
 
 Fiscal adequacy versus social reform, 
 326-27, 421, 422. 
 
 Forest land, 366-68; values, 367 jf.. 
 increment tax on, 418; monopoly, 
 416, 418-19. 
 
 Frankfurt a. M., 17, 141 ; rental tax, 
 123; increment tax, 132-34, 144, 
 164, 169, 170-71, 173, 180, 411. 
 
 General property tax, 1 n., 12-14, 
 
 122-23, 427, 431 ff. 
 Germany, increment tax in, S; 
 
 chap, iv; land policy, 411. 
 Glasgow. 199. 390. 412, 413. 
 Graduated, progressive tax, 7, 8, 9, 
 
 155, 307, 325. 
 
 Habitation tax, 445. 
 
 Hamburg, system of rates, 168-69. 
 
 Herbert's Trustees case, 241. 
 Herrick-Schaap Bill, 843, 457. 
 Hoffman-Neill Rule, 335-36. 
 Home ownership in Canada, 290. 
 Housing problem. See Congestion. 
 Houston Plan, 447 n.. 453-55, 458. 
 
 Improved land, 44. 
 
 Improvements, definition, 70-72; 
 value of, 72-73, 253, 278. 
 
 Incidence of tax, 11, 116-17, 181, 
 182, 192. 193-94, 290-91; theory 
 of, 309-10, 315. 
 
 Income tax, 444. 
 
 Increment duty in England, 209, 
 211-17, 303, 305; exemptions, 
 215-16; land value, 820. 
 
 Increment tax, 7, 9-1 1 ; retroactive, 
 10, 157, 164-65, 329; character- 
 istics, 121, 131-34, 303; origin, 
 130-34; imderlying principles, 
 134-43; in Germany, chap, rv; 
 212-17, 303, 305; local versus 
 imperial, 159-60, 177, 178-79; 
 in Kiao-chau, 187; in Alberta, 
 261. 
 
 Industrial depression in Canada, 
 284/ 
 
 Kiao-chau, 3, 17, 184-89. 
 Komraunalabgabengesetz, 124-25, 
 130. 
 
 Land Conference Report, 243. 
 Land monopoly, effect of tax on, 
 
 96-103, 396, 419-20; definition, 
 
 869-70, 416-17; effect of, 385; 
 
 extent of large estates, 406. 
 Land nationalization. See Single 
 
 Tax. 
 Land policies, in Germany, 139-41, 
 
 411, 416-17; in England, 411-13, 
 
 417. 
 Land taxes, 11, 12, 14, 122/., 190- 
 
 96. 
 Land Union, 242 n. 
 Land value, definition, 2, 4; rise in, 
 
 96, 120, 128, 373, 386; effect of 
 
 tax on, 115, 319-20; urban and 
 
 rural, compared, 344-45, 350-51 ; 
 
 causes of, 368-69. 
 Land value rating bills, 200 / 
 Leaseholds, 43-44, 46, 67, 73-74, 
 
 203-04, 217/.
 
 INDEX 
 
 487 
 
 Local option, 51, 52, 54, S06. 807, 
 S45-46, 434-39, 442, 447; in Ger- 
 many, 124 n., 129; in Canada, 
 263. 264, 265, 271. 
 
 Local taxation, in Australia, 24-25, 
 28-30, 34, 35, 36, 48-55, 60, 88jf ., 
 95-96; in Germany, 122/., 163- 
 77; in England, 121, 196/.; com- 
 missions on, 196-205. 
 
 London County Council, 199. 
 London land values, 360; vacant 
 
 land, 380. 
 Lumsden appeal case, 242-43. 
 
 Manitoba, 254, 255, 257, 265, 266, 
 301. 
 
 Mineral land, 308, 366-68, 416/.; 
 values, 367-68; taxation of, 419- 
 20. 
 
 Mineral-rights duty, 7, 209, 227- 
 33, 305. 310; opposition to, 227/.; 
 proceeds of, 229; annual incre- 
 ment tax, 230-32. 
 
 Minerals as improvements, 71-72. 
 
 Minus assessable value, 241-42. 
 
 Missouri, 452-53, 458. 
 
 Modesto, Cal., 456. 
 
 Mortgages, taxed, 40-41, 43, 46, 
 58; indebtedness, 383-84; effect 
 of tax on loans, 183, 398, 401-02. 
 
 New Brunswick, 300. 
 
 New South Wales, land alienation, 
 21, 22, 97; local government, 29, 
 53, 55; suspension of state tax, 
 29, 34, 53. 55; rating, 29, 35, 53- 
 55, 92-95, 96; proceeds from land 
 tax, 80. 82, 93; budget, 89-90; 
 exemptions, 103. 
 
 New York City, realty tax, 14, 15, 
 428; land value in, 359-60, 364; 
 vacant land, 378-80; probable 
 effects of tax in, 449-50; bills to 
 tax land value, 457-58. 
 
 New Zealand. 17, 34; land tenure, 
 21-23, 96-97; state tax, 24. 36- 
 41, 101-02; local rates, 35, 50-52, 
 95; absentee tax, 39-40, 81 ; valu- 
 ation system, 64, 76, 77; disinte- 
 gration, 96-98; land values, 111- 
 12; congestion, 112-14: rentals, 
 117-19. 
 
 Nova Scotia, 301. 
 
 Overassessment, 275, 288. 
 Overbuilding. 111-14, 295-96, 898, 
 399-400, 408. 
 
 Personalty tax, 251, 846, 427-28, 
 
 432/. 
 Pittsburgh. 2, 455-56. 458. 
 Private property in land, 405 /., 
 
 410, 415-20. 
 Progressive rates. See Graduated 
 
 tax. 
 Property transfer tax, 123, 125-28, 
 
 131/.; in England, 246 n. 
 Proportional taxation, 8, 9, 210, 
 
 305, 307, 326. 
 Public appropriation, 405, 408 /.; 
 
 of urban land, 411-14; mines 
 
 and forests, 417, 420/. 
 Pueblo, Colorado, 456-57, 458. 
 
 Queensland, land tenure, 22; local 
 government, 29, 50; finances, 
 29, 89-90, 96; no state land tax, 
 84; local rates, 29, 35, 48-50, 90- 
 92, 96; valuation system, 76; 
 building conditions, 112-13. 
 
 Rates of tax, in Australia, 87-41, 
 44-48, 101 /.; in Germany, 155 
 /., 166-68; in Kiao-chau, 185- 
 86; in England, 211, 217, 222, 
 227, 230; in Canada, 282. 
 
 Realty tax, 12, 14, 428-30, 439 /., 
 442, 445-48; in New York City, 
 14, 15 n., 428. 
 
 Reichszuwachssteuer, 17, 121, 144- 
 63, 167, 173; proceeds from, 176; 
 amended, 176-77. 
 
 Rent, effect of tax on, 117-20, 181, 
 182, 295, 895 /.. 398, 401-02, 
 420; theory of, 808-09; factors 
 entering into, 894-95, 401-02. 
 
 Rental tax. See Annual value. 
 
 Revenue from land taxes, in New 
 Zealand. 79-81 ; in Australia, 81- 
 83, 90 /.; in England, 245; allo- 
 cation of, 247 n. 
 
 Reversion duty. 7, 9, 209. 217-22, 
 303. 805; retroactive. 217, 222; 
 exemptions from 218-20; ambig- 
 uous wording, 221-22. 
 
 Saskatchewan, 18, 254, 255, 257. 
 262-64, 265, 270, 298, 301.
 
 488 
 
 INDEX 
 
 Scranton, 2, 455-56, 458. 
 
 Seattle, Washington, 452, 458. 
 
 Selling value. See Capital value. 
 
 Separation of revenue sources, 305- 
 07, 433-34, 443, 445-46. 
 
 Single Tax, confused with tax on 
 land value, 15, 17, 33, 341, 451; 
 theory of, 16, 17, 33, 405; in 
 Canada, 253, 263, 266, 269, 270- 
 71, 289, 290, 304; causes of 
 movement, 267-69. 
 
 Single Tax propaganda, in Austra- 
 lia, 31, 32; in Germany, 143-44; 
 in United States, 438, 451, 458; 
 260-67 n. 
 
 Socio-economic effects of tax, 30- 
 81, 105-06, 119-20, 420-21, 422; 
 in Australia, 106-20; in Ger- 
 many, 177-84; in Great Britain, 
 247/.; in Canada, 291-99. 
 
 Socio-political theory, 325-26. 
 
 Somers's system, 337-40, 453. 
 
 South Australia, land tenure, 22; 
 rating, 35, 52-53; state tax, 41, 
 47-48, 80, 82; absentee tax, 41- 
 42, 47-48; undervaluation, 77- 
 78; budget, 89-90. 
 
 Special assessment, 49, 272, 277. 
 
 Speculation in land, 137-38, 256-58, 
 285-86, 369, 370-87; effect of 
 tax on, 114-16, 183-84, 246, 249, 
 
 " 296-98, 396, 398-99, 404, 420; 
 results of, 378 /., 384-87, 405, 
 409-10, 414-17. 
 
 Steuer nach dem gemeinen Wert. 
 See Capital value tax. 
 
 Superassessment, 273, 276, 321. 
 
 Surtax in Saskatchewan, 264. 
 
 Sydney, 54-55, 92. 
 
 Tasmania, land tenure, 22; land 
 tax, 35, 41, 45-47, 80, 83; budget, 
 89-90. 
 
 Tax on land value, chap, i; dis- 
 criminatory, 2, 8-9, 25-26, 303; 
 forms of, 2-3, 7-11, 18, 302; ex- 
 tant, 3, 17-18; definition, 4, 5, 
 7/.; principles, 5-7, 308/.; rea- 
 son for, 3-4, 16-17, 24-25, 30, 34, 
 303; expediency of, 303, 324 /., 
 421, 451-59. 
 
 Toronto, 300. 
 
 Town Act (Alberta), 270-71, 
 289. 
 
 Umsatzsteuer. See Property trans- 
 fer tax. 
 
 Underassessment, 13-14, 77-78, 
 275, 316, 428-31. 432, 441. 
 
 Undeveloped land, causes, 378, 
 381-82; 385; in England, 380-81. 
 
 Undeveloped land duty, 7, 209, 
 222-27, 305, 321; opposition to, 
 223-25; definition, 225; exemp- 
 tions from, 226. 
 
 Unearned increment, 5-6, 30; taxa- 
 tion of, 130; principle of, 135-38, 
 348-49. 
 
 Unimproved value, 75-77; tax on, 
 see Tax on land value. 
 
 United States, local tax problems, 
 1 n., 12-14, 422-23, 424-39; ex- 
 pediency of tax on land value, 
 chap. X, 346-47; trend of reform, 
 439/.; tax in, 451-59. 
 
 Urban land values, 358 /., 365-66, 
 369, 446, 447; in Germany, 136- 
 37, 362, 415; in Canada, 257; 
 causes of, 358-59, 364-65; public 
 appropriation of, 410. 
 
 Valuation of land, frequency of, 
 13, 67-68, 441-42; 61-65, 67 /., 
 331 /.; difficulties of, 61, 330-31; 
 system in Australasia, 45, 62-65, 
 69-77, 103; accuracy, 77-78, 
 132; in Germany, 130; under 
 Finance Act (Great Britain), 
 211-12, 227, 233-44; cost of, 
 238-39, 244; in Canada, 274-77; 
 in United States, 332/.; scienti- 
 fic, 333 /., 440-41; separate, of 
 land and improvements, 203, 
 209, 301-03. 
 
 Value increments of land, 253, 256, 
 280-84. 
 
 Vancouver, 17-18, 270, 271, 273, 
 278, 282, 283, 284, 287, 290, 293, 
 294 296 301. 
 
 Victoria (B.C.), 287, 293, 294, 
 296. 
 
 Victoria (Australia), land aliena- 
 tion, 22, 97; state taxes, 24, 35, 
 41, 44, 45; 80, 82-83; rating, 35; 
 exemptions, 42, 43, 104; valua- 
 tion, 45; budget, 89-90. 
 
 Wages, effect of tax on, 298, 420. 
 Western Australia, land tenure, 22,
 
 INDEX 
 
 489 
 
 97; rating, 36; absentee tax, 41- 
 42; state tax, 41, 48, 80, 83; ex- 
 emptions, 42-43; definition of 
 improved land, 44; budget, 89- 
 90. 
 
 Wertzuwachssteuer. See Increment 
 
 Wild-iand tax, 17, 258-59, 261-62, 
 
 321. 
 Winnipeg, 265, 273, 282, 293, 294.
 
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