Dear list:
Warren Samuels and I have had a private discussion on
this issue that he believes is worth sending to the
list. So I agreed to send it. It is slightly edited.
Warren's initial message was posted on May 17 and
inadvertently reposted on May 24. The correspondence
began when I replied privately to his reposting.
Warren's most recent message, to which Larry Moss
responded, neglected to include the correspondence
that he meant to send.
FIRST IS GUNNING'S REPLY TO THE SAMUELS COMMENT:
Regarding "my" "refutation" of George, you know, of
course, that I am really representing the ideas of
others who, for reasons other than being wrong, have
been disregarded. It seems to me that the burden is on
you or others to identify what you claim are classes
of unearned increments in the price of land -- i.e.,
to tell how you would set about separating the income
due to improvement and superior appraisal from some
unearned increment. To me and my dead economist
colleagues, the unearned increment is like the
legendary animal that is always hiding behind me but
which I could never see. Citing Henry George, as some
others have done, is clearly insufficient.
I doubt that one can meaningfully distinguish between
improved and unimproved land. But even if one could,
the problem is not even close to being solved. If the
land is unimproved, who wants it? The demand for
unimproved land, it seems to me, is practically
non-existent. Even the poorest peasant who occupies
land aims to improve it from his or her point of view.
Let us imagine that somewhere in the world there is a
parcel of unimproved land that nevertheless has market
value. Then I maintain that the market value is due to
one of two things, unless someone has made a grave
error. First, it could be due to an expectation that
the land will have use value after it is improved.
Such expectations vary from entrepreneur to
entrepreneur. Second, it could be due to a speculation
that some entrepreneur will find a valuable use and be
willing to pay a higher price than the current one. In
either case, the focal point, it seems to me, should
be on the entrepreneurial appraisal not on the
physical nature of the earth.
Finally population does not cause land rent to rise.
There are poor countries with very large populations
where the price of land is quite low (the refugee
camps in Sudan, for example) and there are places
where the population density is very low but the price
of land is very high (a private beach on the
coastline). There may be a correlation between the two
but that does not imply causation, one way or the
other.
SECOND IS SAMUELS' REPLY TO GUNNING'S REPLY
My answers to your points are as follows:
1. Land value taxation has been adopted around the
world. Even when not adopted the improved/unimproved
distinction enters into appraisal.
2. Like most anything else, appraisers have
conflicting theories when it comes to valuation.
Years ago I studied the subject but have not kept up.
I also learned, from other sources, that the value of
property varies for different purposes, as odd as it
may seem: taxation, purchase, sale, insurance, ... So
I am neither disturbed nor surprised at imprecision.
3. A substantial part of the portfolios of the ultra
rich in every country--the details varying between
countries--is holdings of land for long-term growth
due to population pressure.
4. During the final years of the USSR a petition was
sent to Gorbie's regime proposing Georgian taxation.
Signers came from every wing of economics.
5. The problem which pervades Georgian taxation is
choosing an historical base point for the calculation
of economic rent.
I think that the foregoing should cover most if not
all of your concerns and objections.
THIRD IS GUNNING'S REPLY TO SAMUELS' REPLY TO
GUNNING'S REPLY:
Warren, I know that the land tax has been adopted
around the world. So have tariffs. In any event, I am
not claiming that land taxes are a worse way for to
raise revenue than, say, income taxes. I am just
claiming that they won't achieve George's goal.
I am not disturbed or surprised by imprecision either.
Yes, the rich own land; but I will bet that this is
because land is ordinarily a good hedge against
inflation or because its services yield rental income.
In any case, if you want to accomplish the objective
of increasing taxes on the rich, there is a more
direct way to do it.
Too many wings of economics, I would suggest, tongue
in cheek.
In my view, it is impossible to choose a base year
without entrepreneurship paying practically the entire
tax either in retrospect or in prospect. If it is to
pay the tax in prospect, the entrepreneur will simply
shift to using his entrepreneurship somewhere else
that is less in the interests of consumers.
END
Pat Gunning
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