THE ADMINISTRATION OF PROPERTY AS

COMMUNITY SERVICES

Real-Estate Administration for Profit

 

All business consists in the administration of property and all revenue from business is the product of administrative services.

 

*1 The real-estate business comprises the adminis­tration of two different kinds of property: land, with the public improvements and services — the public capital — appurtenant to it; and its private improvements, with the services of the private capital invested therein.

 

The land yields to its owner a net revenue that is called ground rent. The improvements yield to their owner, above ordinary interest and expenses, a net revenue that is properly called the profits of administration, or the earnings of administrative labor.

 

The ownership and management of real-estate, then, is a special division of general business only in the fact that it is the administration of fixed instead of moveable and personal properties. It differs from a commercial, manufacturing or indus­trial business only in that the property being ad­ministered, with the services incorporated in it, is not being passed from hand to hand as in these industries, but the services of it are divided up into periods of time and sold piecemeal, as it were, under various tenancies, and the physical turnover of the business takes the form of renewals and replace­ments, instead of transfers of ownership outright.

 

In a very primitive economy the owner-adminis­trator, such as a farmer, merchant or manufacturer is commonly the owner of and must administer several different kinds of property. He owns per­sonal property in his products which are his moving capital or turnover and also in his movable equip­ment and appliances. He owns real-estate in all his fixed equipment and improvements. This is his fixed capital. And he also owns real-estate in his land, and in this he has the services of public capital as the basis of its value. Not only must he administer all these various kinds of property, but he must supervise all the subordinate labor he engages to assist him in his enterprise. Such organization of industry is simple only in the sense of there being but little division of labor; from the standpoint of the variety and multiplicity of functions that the owner must perform, the situation must be regarded as highly complex.

 

Now, the whole development of industry consists in its being divided up into many different kinds of units that are structurally separate and distinct but that are connected together by the system of commercial exchange. This division takes place along the line of the different kinds of properties and services to be administered. The more highly the type of administration suitable for one kind of property is developed, the less such an owner or organization of owners can afford to have its capital tied up in properties requiring a different type of administration. This is exemplified in chain-sales organizations, the owners of which cannot afford to have their capital tied up in or to give ad­ministrative services to the buildings they occupy, much less the land and the public improvements appurtenant to it. In like manner, the most highly specialized business and professional persons seldom own the premises they occupy, not because they lack the necessary re­sources, but because they cannot give the special administrative services that such properties require.

 

So it comes to pass that in an advanced economy and especially in metropolitan communities the dif­ferent types of properties are held generally under separate ownership and administration. The movables, in both turnover and appliances, are owned and managed by tenants of buildings or other private im­provements on land. These buildings, with all their fixed appliances and services, are owned and ad­ministered by persons or organizations who are themselves tenants of the lands they occupy. And these lands, with all the public appliances and services appurtenant to them, are administered by persons and organizations who own them and who, because of their titles as proprietors and the serv­ices they perform, are, in effect, the distributive officers of public capital — servants of the community as a whole.

 

Every tenant in a building, dwelling or carrying on business there, is a purchaser of the services that the building provides. And it is the proper and useful business of those who own and administer the building to see that all the services of the building to its tenants are adequately and efficiently supplied. Their whole profit from the building is the product of this administrative activity. This includes general upkeep and maintenance, the pur­chase of materials and supplies and the payment of wages for labor engaged in upkeep and in all the services that are provided for the tenants. All of this, and the interest paid on or credited to the fixed investment, is the current capital turnover. The only return for administrative services, the only profit of the enterprise, will be the amount by which the returns from rentals exceed all these current costs.

 

Now, since building space and services are sold in open market, it is clear that the rentals represent the market value of the space and services. It is the aim and duty of good administration to make and maintain this value at the highest level. This requires, first, that the services be supplied and maintained, but, over and above this, it also re­quires that everything that is possible be done to

keep up the public demand. This branch of build­ing or hotel administration extends to such matters as protecting the tenants from all theft, injury or insubordination on the part of the service personnel, as well as policing the premises and guarding the tenants against everything inimical to their comfort or prosperity. All of these negative services main­tain the demand and therefore the value of the positive services supplied.

 

Now just as the building owners depend for their market upon the demand for building services by the owners of moveable goods and services, so do the owners of land depend upon the demand of those who own and administer building properties and services. The building or hotel owner sells services; so does the land owner; and in both cases good administration has two aspects — not only the keeping up and improvement of the services them­selves, but also the building up and maintaining of a proper and sufficient demand for them.

 

It must be acknowledged that building owners have thus far shown a keener consciousness of the essentials of their business. They have not at great cost purchased buildings, only partly tenanted or yielding but little income, and then abandoned them to the mercies of the servants and employees with­out supervision or control or sufficient funds, per­mitting them to find the costs and deficiencies by levies on the properties and operations of the ten­ants. Building owners are too wise for this. But the owners of lands and locations do something very similar. They purchase costly sites, idle or only partly tenanted and yielding little income. They contribute a portion of the cost of the public bene­fits received by their properties, yet they leave the conduct of these services entirely unsupervised in the hands of the public servants themselves. But, instead of doing anything to protect their present or prospective tenants in the quiet use and enjoyment of buildings or other improvements, the site owners acquiesce and even encourage the public servants and authorities in their practice of levying on and seizing the properties and demoralizing the business of their tenants, the building owners, and also the business and belongings of the occupants of the buildings. Land owners do not know or do not realize that all these charges laid against the tenants of buildings and against the tenants of the land, who own the buildings,— that all these respectable depredations against both kinds of tenants dras­tically limit their rent-paying power and cancel out the advantages for which all these tenants pay.

 

This condition manifests itself in two ways: First, as to the lands and the buildings actually occupied, it cuts down the amount of rent that can be offered or paid by the occupants and, second, by its deterrent effects upon new tenants and new occupancies, it limits and holds down the entire demand for land and building services to that of the present occupants alone. The result is that only the lands and buildings that are in present use have any present or income value, and all those potential properties kept out of use in this manner have no present actual value at all, however much may be the investment in them without income,— unless they be allowed a mere gambler’s value — the value of hopes or expectations. And the carrying of all such idle properties without income is a heavy loss of capital earnings and profits for all owners of land and buildings, besides the actual melting away of capital in obsolescence and depreciation. This melting down of the value of idle buildings prob­ably accounts for there being usually so much less of costly buildings than of costly lands kept out of use by taxing away all the demand for them.

 

This vast disemployment of potentially valuable land because of the destruction of all demand for it, because of the limitation on the demand for and earning capacity of buildings, which, in turn, comes from the hazards and poor earnings on the part of those who use building space and services (which again reflects their low production due to the scant purchasing power of all their customers) — this places an enormous burden upon land owner­ship such as no other one kind of property ever has to bear. In fact, this burden is the reflex of the burdens borne by every other kind of pro­perty and business that there is, for it is only the profits arising out of every other kind of business and services that creates and constitutes any de­mand for the use and services of land.

 

It is well, therefore, to consider just what service it is that land owners have to sell. To do this let us first look at the building owner. He does not sell mere space, but the services with which he surrounds and conditions the space, these compris­ing the administrative services that he directly per­forms and all the services that he hires and pur­chases from others, including the use of the public capital that he receives from the owner of the land. Thus the building owner shows the true pattern for the value of land:[1] For it is not the land itself but the supply of public services and the immunities surrounding and enjoyed at the site that constitutes the basis of all its present value.

 

But the mere presence of public services is not enough. There must also be demand. Every kind of service, including commodities, comes into being through human activity, but no service or com­modity has any value except in the presence of human demand, and this demand must itself con­sist of other services or commodities that are offered  (through open market) in exchange.

 

The real value of the land, then, like any other value, depends, first, upon the kind and amount of services its tenant will receive, and, second, it depends also upon the effective demand on the part of actual or immediately prospective tenants. This effective demand arises out of the amount of serv­ices and commodities (wealth) that the occupants are permitted to create in connection with their use of the land, and the rent they offer to pay (which is the current value of the land) is that portion of this wealth which goes in open market in exchange for the public advantages that come to them through possession of the land. The land value, therefore, as seen by the occupier, is the value of the public services he receives and pays for; as seen by the owner it is the value of the rent — wealth — that is given by the occupier in exchange for the services he receives.

 

It is the right of the occupier to receive services and the right of the owner to receive rent. The rent is, in fact, the only thing of value that the owner (as land owner) receives or has any right to receive, and this right is expressly conferred upon him by the spontaneous will and power of the whole society. In virtue of his position thus established he is, taken collectively, the proprietary department of the society, and because of his official proprietorship there must flow into his collective hands the control and disposition by sale to tenants of the net services resulting from all the activities, both good and bad, of the current political or public service department of society. These public servants and officers, as such, are not proprietors. They own no part of the territory. They receive stipulated wages and salaries as distinguished from profits arising out of ownership and administration. The proprietor, on the contrary, depends for his earn­ings or profits upon the net income remaining to him after all the labor costs (wages and salaries) and all the capital costs (interest) of the public services have been met.

 

With the administrative position of the land­owning proprietor thus seen to be similar to the position of the proprietor in the conduct of any other business, it remains to point out the ways in which he is accustomed to exercise his adminis­trative functions and the direction in which such activity on his part can be most profitably ex­tended. And since the public services must extend, in varying degree, to the whole territory and so serve the interest of all the proprietors of a com­munity it is necessary that they associate themselves together and act, for the most part, collectively and in their organized capacity. This is essential, alike for unity and consistency of action, and also for the exercise of effective influence and authority.

 

Every business consists in selling services, either directly or embodied in commodities. They are sold for money or other instruments of debt and credit by means of which other goods and services, soon or late, are obtained in exchange for those that have been sold. There must always be a service and production department and a department of ad­ministration and sales. This latter department is always properly under control of the owning or proprietary interest or group.

 

What the proprietors of land have to sell and do sell is the net public services received by the occupants of their sites. Their tenants and lessees are their patrons and customers. The public ser­vants and officers are the service and production department whence arises the services that are sold. Each proprietor is custodian of so much of the general public service as attaches itself and gives rental value to his particular location. Indi­vidually, he puts the land in possession of those tenants who can make the highest use of the services it affords, attending to all matters of the sales of these services and collection of the rent paid for them.[2] Collectively, he owes to his tenants and to himself the duty of protecting them from property seizures and political domination, all in the interest of higher productivity and purchasing power and consequent further demand for locations.

 

The land-owning proprietary interests as a group, however, have relations with two classes of per­sons, public and private — those who perform public services upon public territory or distribute them publicly through public rights of way, using public capital in connection therewith, and those who per­form private services upon the private territory, using private capital in connection therewith and distributing these services among themselves by private contracts. These last, exchanging their prod­ucts and services, constitute all private industry and trade. But private industry must have public rights of way for communication and exchange, security of property and possession, and other serv­ices that can be supplied only by or under public authority.

 

Since all such services can be delivered only through highways and to nothing but the locations served by them, it is the function of the publicly-established proprietors to sell these services to the private occupants and users. This is the manner in which free bargaining to pay ground rent estab­lishes the market value of the services supplied to each location and provides a right and proper basis of payment according to the value of that portion of the public services that each occupier individu­ally receives. Thus through the proprietor the rent-paying occupant obtains the services of government by free negotiation and without either party im­posing any duress or coercion upon the other.

 

 

But the relation of the public proprietors to that other class of public persons who perform the services that are sold to the occupiers who pay rent for them is of a different character. Notwith­standing that this class is properly a service class, they act and assert themselves virtually as masters, for, in the course of development of “free insti­tutions,” they have inherited the kingly power of seizing private property, — a power unknown to Anglo-Saxons for centuries before the Normans laid upon them the slave technique of despotic Rome. This right to seize property that the Norman kings fought for and the Tudors and Stuarts so freely and fatally practiced has been carefully preserved to their present-day successors in power, whether by popular election or otherwise, in what is now tamely tolerated as the power of taxation and regulation.

 

So we have in the community business today the anomalous conditions of the proprietors, who get all the net public value there is, standing idly by while the service department, uncontrolled by their supervisory authority, seizes increasingly the already diminishing private property of the population and so impoverishes and eventually depopu­lates the land. At present taxation is said to be seizing nearly a third of all the wealth and income (rent, wages, interest and profits) now so meagerly and under so many restrictions produced.

 

These public servants, in the aggregate, are per­mitted to fix their own wages and other expenses and to pay themselves, not by any exchange of services, as other servants do, but out of their seizures by taxation and out of their public bor­rowings on the faith of future seizures. They are under no responsibility to any paymasters or other authority apart from themselves. Their sup­posed responsibility to the electorate, in practice, takes the form of legislating special privileges and more and more public funds and plunder into the hands of special economic groups and classes whose support they find useful to their continuance in office and power. Such is the body of servants over whom the owners and proprietors of each community must exercise supervisory control. And this is imperative, for, as taxation mounts ever higher, rent must ever decline. This result must follow so long as public revenue is raised by force and spent on favored classes and groups.

 

As public revenue is now raised and expended there can be no long term outlook for anything but decline in land values and rents. This is so, not alone because the whole of present taxation is en­forced tribute instead of voluntary exchange, but because the whole of it is a direct charge against the value of the public services and, therefore, diminishes rent in the first instance by the total amount raised by taxation. In addition to this, the present seizures by taxation create an indirect charge against the public services by an incalcu­lable amount, owing to the loss and damage it inflicts upon all users of land by hampering and demoralizing their business and productivity. It is necessary to de­duct from the gross advantages of public services all taxes or other charges, direct and indirect, laid on those who receive the services, in order to arrive at the residuum which is their net value. This net value is precisely what is sold to the occupants of land and paid for by them in ground rent. Since this net value of the public services to land is all that the proprietors can sell, it is only by enlarge­ment of this net value that their incomes can be increased. This is just where land-owners should organize and give their best powers of supervision and constructive administration. It is a field vast in extent and vastly in need of services of this kind. It is enormously inviting. It can be made highly fruitful to the community and enormously profitable to the whole land-owning interest in re­turn for whatever amount of cultivation they will give to it.

 

What is desired, then, is to build up the net value of public services. This can be done only by increasing the demand for or the supply of them, whichever is the limiting factor.

 

There is in most places a far greater supply of public services than there is any effective demand or market for. There are almost endless miles of improved streets and highways through which are delivered to neighborhoods and locations the costly and complex services that public authorities and agencies acting under them know how to supply, and yet the ability of private capital and labor, of business enterprise in general, to pay for and make use of these services is so limited and restricted that probably over half of the property that should be benefited by these services is entirely unoccupied and yielding to its owners no revenue at all, while other large portions of this property are so poorly improved and unprofitably occupied that the income fails to pay even local taxes, much less any return upon the cost or supposed value of the land. For all of these widely extended public services there is only such demand as is represented by the few and occasional occupiers who can carry on enough business to justify any investment in improvements and in that way make any profitable use of the public services with which the sites are supplied. It is only at the relatively few locations thus occu­pied that the public services enjoy any demand or give land any value, in the sense of present land value, for it is here only that any rent is paid.

It is a habit of thought to consider land that yields no rent as still having value. We fail to realize that demand is just as essential to value as is supply. Whatever be the amount of land or the amount of public services supplied to it, it can at no time have any value beyond its yield in actual revenue or what its owner gains from himself using it. Men may gamble in their estimates as to future yield, but no value is realized unless or until that future yield becomes a present reality. There is a tendency to suppose that because one location can be sold or rented all similar locations can be rented or sold, forgetting that value is strictly limited to demand. When the owners of twenty similar sites can sell or rent only one of them, they are not thereby assured that they can sell or rent all of them. The entire demand has been satisfied by the one transaction and the value of all the unsold will have to await future demand. Similarly, if twenty owners should receive twenty identical offers for similar sites and only one sale is made, then each of the other nineteen will sup­pose that he could have made a sale and that, therefore, his is  of the same value as the one the sale of which has absorbed all existing demand. In such case the present realizable value of all the sites together is no greater than the rent or price paid for the one for which there is actual demand. The same is true in any whole community. There can be no present value in their lands and the services supplied to them beyond the value of those which are in actual use in response to the actually existing demand for them. It should be clear to land owners that their chief obstacle is not any lack in the supply of public services and advantages that they have to sell, but in the lack of demand for them. The truth is that the whole present value of land in a community cannot at any time be any greater than the present effective demand for the services that it affords.

 

The foregoing prompts inquiry how comes this great disproportion between the supply and the de­mand for public services — just what it is that keeps the supply up and that keeps the demand down.

 

As to keeping the supply up, it is well known that practically all public services (as well as dis­services) are provided and maintained out of the proceeds of direct and indirect taxation in all its thousand-fold rigors and insidious forms. Public services are not supplied in response to any eco­nomic demand on the part of those who are com­pelled to provide the cost of them, nor are these services distributed in proportion to the contri­butions of those who are forced to provide their cost. There is no relation of exchange between what anyone surrenders as taxes and what he receives in public protection or other services. It is a fact of nature and of society that public advantages can­not be returned in the same manner and proportion that their cost is collected in taxes. And any attempt by taxpayers to get value in exchange for what they give up would lead only to further violence and disorder.

 

But in the structure of all settled societies there is the institution of land ownership, with its inci­dence of rent, to provide for the fair and orderly distribution of its public services by voluntary ex­change on a measured basis — a market basis — of value received. This is the great office and social function of land ownership — the just and peaceable distribution by free contract of all the special ad­vantages, natural resources and public services of the community. Any services not distributed to the territory of the society by and through its system of public ways and communications and, therefore, not attaching to and reflecting themselves in the rent of land are necessarily private services. All private services are provided by and exchanged between and distributed among private persons, so far as they are not prevented or discouraged by taxation and pro­hibitory laws. It is these private services, performed by the occupants of the private parts of the territory, that create all private wealth and give rise to and constitute all the demand that there is for land — for the public services to land — for which rent is paid. Any service or property conferred upon a pri­vate person, class or group by political authority becomes, ipso facto, not a public but a private service and, being privately received, it is a special privilege conferred at public cost and expense. All such as this is, of course, to the detriment of public service and, therefore, a deduction against rent.

 

Public services can be distributed in exchange for rent only to the extent that the private demand for them is active and alive. Whatever burdens private industry must bear; whatever restrictions upon its voluntary operations and exchanges are imposed; whatever inhibitions it suffers by reason of the hazards and uncertainties with which it is beset; all of these influences, both directly and in­directly, destroy its capacity to make profitable use of public services, or other community resources, thus paralyzing the demand for land. Considering the magnitude of taxation, the violent and vexatious manner in which it is imposed, and the destructive purposes for which its proceeds are so largely used, it is a wonder that any demand for land persists and that far more of it is not idle and unused.

 

Paradoxical as it may seem, the taxation which now pays the wages of public servants so bears upon trade and industry as to all but destroy the demand for public services and with it most of their value, as this value is reflected in the rental value of land. But what little value does remain, what little rent is paid (including under rent the advantages enjoyed by owner-users), represents the final residuum, or net value, delivered to its terri­tory, of all the services performed by or under public authority. The actual rent is the value of the governmental services that remains after deduc­tion of all costs collected by government and of other detriments suffered under it. All these costs and detriments destroy demand; for taxation, un­like rent, does not give any access to land on the basis of value received, as rent does, or on any other basis.

 

Industry does not pay for its public benefits and services first in taxes and then again in rent. The two together are all it does or can pay. Whether it pays chiefly in rent or chiefly in taxes, the taxes it pays are always a charge against rent; rent is never a charge against taxes. Taxes are always taken by force or stealth, whereas rent can never be collected but by contract and consent. If taken otherwise, it is not rent. It becomes taxation or tribute wrung by force. But in modern times land owners have no political or any other coercive power. They perform the great public service of merchan­dising the community’s resources and advantages into the most productive hands. Rent is their pay­ment for this great public service. But taxation, being imposed with no regard to the value by market-measure of any benefit conferred, is a charge against rent, for it cuts down the demand for and hence the market value of all public services and thus rules out rent.

 

From whatever angle viewed, it must be seen that the administration of land has to do not with the land merely as land but with the services that are supplied to it. And organized landowners must concern themselves not alone with the services but also with restoring and maintaining the demand for them, without which the services can have no value at all.

 

The implications of such an administrative policy on the part of the organized proprietary interest are at once a challenge to their public spirit and an invitation to almost unimaginable affluence and prosperity. The initial obstacles are small, and the incentive to proceed will be augmented by accumu­lating rewards. Rising values and profits will insure this administrative policy being more and more widely extended and applied. The getting of profit­able tenants or purchasers has so far been left almost entirely to accident. With land-owning as a business, good administration will rise above mere wishful thinking into intelligent action — the highest service to self through the best service to others. No other policy is profitable or sound.

 

The whole field of political action is marked by complete absence of any general and conscious policy of public service. In national, state, and even local governments, the public power is exer­cised largely at the behest or dictation of pressure groups and special interests, each seeking advan­tages to itself through measures detrimental to each other and to the public as a whole. A catalog of these groups would range from the manufac­turers’ associations to the grocers’ or plumbers’ local unions; from the learned professional societies to the organized barbers and beauticians, not forget­ting the endless seekers after subsidies, pensions and doles. The multiplicity of their diverse and antagonistic interests, their clamor for privileges, and the demands of each group for the burdening and restricting of the others turns the process of government into an orgy of conflict and away from the performance of public services. The politicians, political officers, seize property — taxes. They levy tribute. And they use public funds to maintain themselves in office and in the continued exercise of their deadly power. Even such net and final balance of benefits above injuries as they might confer, they are not in any position to sell to their constituents because the organization for it — the distribution of its value through land-ownership and rent — is not in their hands.

The owners of lands, sites and locations, on the contrary, constitute the one economic group whose interests rise superior to all this conflict and de­struction. This group, always established by public authority, takes custody of and has disposition of all the truly public services. They are the real purveyors of public services in exchange for rent. This is the one group that depends for its revenues upon the productiveness and prosperity of all the others.

 

When men learn the art of peaceful exchange they cease to wander in search of subsistence. They settle in communities and rise above mere depen­dence on nature by the arts they develop in serving and exchanging with each other. This they cannot do without the aid and protection of public services. But taxation is a force that cancels the value of the public services and finally extinguishes it, and the society dies. Meantime, whatever public values re­main unextinguished by taxation attach themselves to the territory as the net value of the public services. During this whole period of civilized existence, as long as there are any public values, the institution of property in land determines that ground rent shall be paid for these net services, and that this revenue shall flow into the hands of the proprietary class. This natural and historical fact is what puts upon this class the prime obli­gation of administering the public services and also guarantees them ample and automatic returns upon such now little performed though sorely needed public supervision.

 

The proprietors must learn that every dollar seized by unsupervised public servants means at least one dollar less value in the supposed services performed by them, one dollar gone out of the natural demand for services, one dollar that can no longer be offered to location owners for services that are now worth a dollar less. Enlightened and united proprietors can retrieve that dollar from the hands of irresponsible public servants. Every dollar so retrieved will come into the fund of rent, for it will make the public services worth at least a dollar more and, at the same time, leave a dollar in the land user’s hand wherewith to pay for serv­ices that are now of at least a dollar’s greater worth. In fact, since all taxation, being barbaric and  anti-social in its methods and its effects, is a burden on land value and rent, then with taxation wholly discontinued, the entire present tax fund would be transferred and annexed to the present rent of land. Out of this vast fund of rent the land-owning interest would need to expend only enough to maintain essential public services at their present existing levels.

 

But with taxation abolished, the value of these present services would be enormously enhanced. Without the monstrous impediments to production, direct and indirect, that taxation now imposes, and without any restrictions on the exchanges of wealth and services, this splendid liberation and expansion of productive industry would of necessity carry with it a corresponding requirement for public services and, therefore, a mighty expansion in the demand for and the use and occupancy of land. Thus, even without any improvement in the public services themselves, the increase in their demand and market value would be vast indeed. To satisfy this de­mand, all parcels of well served land now idle or but poorly used would be drawn into profitable use, the untaxed occupiers gladly paying rent to the owners according to the then market value of the services so freely enjoyed. And any owner who might choose to be his own tenant and occupier would enjoy advantages fully equivalent to the new rent.

 

If the proprietors of land should perform such a mighty service to the general public as to abolish all taxes, they could not only retain whatever reve­nues they now enjoy, but their reward would con­sist in the whole excess of present taxation above necessary public costs, all of the increased revenue from land now in use, and also all of that new revenue coming to the land that is now idle or only partly used or improved. At the same time, the clear gain to the unburdened users of land, to active capital and labor under complete freedom of production and exchange, would be almost un­imaginable, while the net income to land, above all necessary public costs, would be stupendous. But, of course, all this would require that land owners, out of their magnificent sales returns set apart enough to meet their proper costs, just as any other businessmen do, and give all requisite administration and supervision to the public proper­ties and employees. And the circumstances of the necessary costs being supplied out of their ex­panded incomes would of itself insure to them ample public power and administrative authority.

 

 

These reflections on the total abolition of taxes are not put forward to suggest that such a result could be accomplished by one stroke but rather to illustrate the position occupied by the owners of land in relation to taxation, and to the cost of and demand for public services and to suggest a constructive policy. It is not possible for depressed land owners to form a pressure group to compel the public by law to use more land and pay higher rents. But land owners need to take advantage of the fact that taxes are much more injurious to the general interest than they are to their particular in­terest in rents and land values. Their work for the remission of taxes will benefit both the public and themselves. Increasing taxes means increasing pub­lic distress, but rent and the use of land are in­creased only by improvement in the economic con­dition of the population as a whole. Just as taxation deducts from and depresses the earnings of the population, just as it depresses the demand for land and deducts from its income, so is any re­mission of taxes at once an addition (by restoration) to the earnings of the population and to the effect­ive demand for land.

 

The power and influence of the owning interest in land is not inconsiderable, and a great deal is being done to lighten the tax burden on this kind of property, but this is not enough. This is only to shift the burden to other kinds of property and production and thus diminish the demand for real estate and make it even more idle and unproductive than before. What is required is not merely to ease the burden on real estate, but especially to unburden all those forms of production and ex­change that create the wealth and services upon which all the demand for real estate rests.

 

If the owners of buildings should find their ten­ants being impoverished and driven away by the personnel in charge of the building, they would not hesitate to give the necessary supervision over the personnel to put an end to these injuries. It should be understood that the public servants, by their seizures of property and restriction on pro­duction, are impoverishing all the users and occu­piers of land, diminishing the profits and there­fore cutting down the employment of both capital and labor and all that activity which alone creates demand for real estate and the public services attached to land. The injury to the income from land is almost incalculable: Every dollar extorted by public servants in taxes is a direct withdrawal from the taxpayer of one dollar of the value of the services for which he pays rent. *2 He, therefore, pays a dollar less rent than he otherwise would. Often, he fails in business and ceases to pay rent at all. *3 The value withdrawn from him by taxes has more than offset the value conferred upon him by services. The left hand of the public servant has taken back in taxes more than the right hand has performed in services. The loss to the taxpayer is not merely the tax but also all that distress and demoralization to him and to those whom he serves that comes from the hazards, vexations and uncertainties connected with the laying of the taxes and with the restraints upon business for the enforcement of which the tax funds are so largely spent. How much greater the injury to production and business is than the amount of the taxes actually taken, it is impossible to know, but the inhibition on enter­prise must be incalculably large and severe. It is only when the indirect cost of taxation is con­sidered and how this may be many times greater than the taxes themselves that it can be realized what a mighty deduction is made by the harmful acts of the public servants themselves from the otherwise value of the services for which the occupiers of real estate pay rent. There can be no doubt that the penalizing of production by taxation de­stroys rent by many times more than the aggregate amount of all taxes taken.

 

The suggestion is clear that so far as the pro­prietary interest becomes instrumental in lifting any tax upon the users of their property or lands, they can increase their returns in rents by the full amount of the burden directly removed and also by a further indefinite amount. It is of tremendous importance to owners to know that whatever tax relief they may procure for their tenants or purchasers will surely be rewarded to them in rents and selling values in far greater measure than the amount by which their tenants or purchasers are directly relieved. And if this tax relief should be carried so far as to impair the revenues actually needed for essential public services, it would yet be pos­sible for the land owners to replace every dollar of the deficiency and still retain for themselves a wide margin of profit on every one of these neces­sary tax dollars lifted from their tenants. Rent is no burden to the land user, even if he should pay in rent more than he has been exempted in taxes, for he then pays for services he desires a price no greater than he desires to pay. And he finds it to his profit and advantage to pay in higher rent more than he has been exempted in taxes, for he has been relieved not only from the taxes them­selves but also from indirect burdens and losses of far greater amount.

 

The fact that land users voluntarily pay rent for the indirect advantages as well as for the direct advantages that come to them by way of tax relief should be carefully considered by those who seek to obtain legislation for the limitation of taxes upon real estate. Examination cannot fail to reveal that whereas relief of rent or site value from taxation cannot benefit the owners above the amount of the taxes actually lifted, a tax relief for improvements or other capital not only relieves the improvements but also returns back to the land-owning interest an enhancement of rental and sales value far greater than the mere amount of the taxes remitted. The land-owning interest, as such, not being engaged in the active or productive use of land, they, as land owners, have no private business interests that taxation can weaken or destroy. It is, therefore, impossible for any tax relief upon site values to bring them any benefit or increase of value beyond the flat amount of the tax relief itself, for a tax laid upon site value or rent cannot diminish net income by any more than the amount of the tax. But a tax laid on the use or on the user of land diminishes its desirability to the user and there­fore its revenue and value, not only by the direct amount of the tax, but also by the amount of in­direct damage and detriment suffered by the busi­ness for which the land is used. It is therefore far more vital to the value and income of land that the improvements and use of land should be exempted than that taxation should be lifted directly from the land itself. Untaxing the use of land yields to its owner a multiple, or at least a double, benefit whereas untaxing the land yields at best only a direct and single benefit to its owner.

 

When once it is seen that taxation of general business and its products and activities is a mul­tiple detriment to the value of land and measures for the relief of those using it are put into effect immensely important tendencies and influences are bound to arise.

 

The prosperity of all the interests engaged in production constitutes the whole demand for the public services afforded by land and gives these services their market value. But it cannot be ex­pected that the wealth-producing, land-using in­terests will or ever can obtain much tax relief for themselves. Their interests are too divided and diverse for any unity or unanimity of action. More­over, these diverse groups, wherever they are or­ganized, are engaged in such a merry war of throw­ing tax burdens and other political restraints and embarrassments upon one another that they un­wittingly keep their own capital and labor largely disemployed and the productiveness of all of them is seriously diminished and impaired.

 

But land-owners have a unity and solidarity of interest. Their only function as land owners, their only proper business, is to redeem and maintain their own incomes — the values of their lands. This calls for services in behalf of general business, in behalf of land users, present and prospective.

 

Realizing that both the present capital value and the annual value of land is the value of the serv­ices publicly supplied to it, and that they themselves are the purveyors of these services to the whole productive population and that what they receive for these public services is the whole rent or in­come from land and that this rent, either current or capitalized, represents and, in fact, is the whole exchange or market value of all the public services, and that all taxes are a deduction from this ex­change value, the proprietors find their own su­preme and immediate interest to be in the removal of all taxation that is not necessary for the public services that give rental value to land.

 

 

When it comes to the question of what taxes should first be removed, the proprietary land-owning interest will find that removing taxes on general business and the use and improvement of land results, as we have seen, in a double benefit to land — that rent is increased directly by the amount of taxes abolished and also indirectly by removal of the indirect damage and detriment that falls upon the users of land. This makes it clear that the first taxes that the proprietors should seek to remove should be those that fall upon the sources of their incomes — that burden the payers of their rents. And in their untaxing of the sources of rent, they should mark first for removal not necessarily those taxes that are highest in amount, but those that are most injurious in their effects, for these are the taxes that destroy the most land value per unit of tax taken. These are the taxes whose abolition will yield back to land owners not only the amount of the tax itself, but also the greatest measure of indirect enhancement of rent by reason of the greater amount of indirect damage and detriment to rent-payers thus removed. Besides this inherent advan­tage in the early removal of the taxes that are most injurious, there are considerations of policy as well, for by this course the greatest enhance­ments of rent are obtained by the smallest re­moval of taxes and, therefore, against the smallest amount of opposition on the part of the tax-gather­ing interests and authorities and with the greatest amount of cooperation from the general business interests, for the more widespread and insidious taxes are generally not imposed at the behest of any special interest or group for purposes other than revenue and so have few defenders apart from those who collect or receive them.

 

Starting at the level of least resistance, the pro­prietary interest can extend tax benefits and ex­emptions to the business world of land users with corresponding enhancements of rent. With the taxes on production finally abolished and ground rent thus enormously enhanced, a small part of this would suffice to support public services at existing levels. Such contribution out of gross returns would have no kinship with taxation. It would be voluntary and self-imposed, like money turned back in any other business to maintain operations and increase profits and income. Thus the proprietary interest comes completely into its proper position of res­ponsibility and supervision over the public servants and employes and into a conscious, enlightened and profitable administration of the public capital from which its income is derived. But prior to all this are the immense profits and rewards from the mere exemption and protection of their land users against the worst ravages of taxation. This cannot fail to transform into new rent what was previously seized and collected as taxes and also a further and doubtless far greater rent arising out of the enormous new production liberated by cessation of the in­direct damages incident alike to the rude and devi­ous seizing and to the profligate spending of the taxes formerly imposed.

 

The real estate interest is, or readily can be, the most influential and powerful of all business groups. When it seeks relief merely by shifting direct tax­ation into more indirect forms it simply puts the business and production of its customers under in­creasing burdens that constantly weaken the demand for and the value of all property. But if it will serve all its tenants and purchasers by lifting these restrictions upon them then, by such public service, the real estate interest will be serving itself doubly well. That part of it which represents improvements on land will be enabled to operate these improve­ments to full capacity for eager tenants at rentals based upon flourishing business activity and abund­ant production. And those interests represented by investments in land will find themselves beset with demand for their formerly idle locations and with increasing bid and demand for the locations al­ready in use. The healthy effect upon rental and sales values can better be imagined than described. And such a boom in rents and values could not collapse, for it would be based upon the actual production of wealth and not upon obligations and debts that can never be paid.

 

 

All other businesses and exchanges of human services have been mightily improved and trans­formed. But the business of land ownership, of exchanging public services for rent, this ownership and business by which every society apportions its territory and resources and creates all of its public values, this business alone stands passive and su­pine while being progressively undermined by the predacious taxation that throttles all business and thereby keeps land out of demand and therefore out of value and out of use.

 

Public and political officers, unlike the owners of land, have no stake or interest in the public values. Like the servants and subordinates in any other business, they need the restraint and supervision of the proprietors of that business, whose property and income is built up by supervised services or destroyed by unsupervised default or devastation. The only authentic and legitimate services of gov­ernment are those bestowed upon its territory and thus into the charge of those who own that terri­tory. It is the business of these proprietors to administer their property by keeping up the quality of and the demand for these services and to dis­tribute them among the members of the community at prices arrived at in open market and voluntarily paid. But this last is only the sales side of the business. If the proprietors are to have for long any values to sell, they must act also on the ad­ministration and production side of their business. They must draw public policies away from destruc­tion by taxation and other violence to business and production, and guide them into the ways of public services and the up building of rent. Properly and democratically organized among themselves, they become the administrators and the beneficial owners (enjoyers of the net revenues) of the largest, most necessary and indispensable and, therefore, when well conducted, the most profitable business in the entire world — no less, indeed, than the whole busi­ness of government as the organization, production and distribution of community services, like all other services, on a measured market basis and for value received.

 

 

All of the foregoing has been stated with a view to land ownership being rehabilitated from its pres­ent moribund state into an active and prosperous business for which there is an enormous public need and to which the returns could not fail to be prompt and vast. The principles of sound business have been kept constantly in view, but it is worthy of note that such thoroughgoing application of these principles as is here proposed contains implications that are of wide and deep social significance.

 

The progressive reduction of taxation and the still faster enhancement of ground rent and land values must surely transform government, from the preda­cious character in which it finally destroys the society it assumes to serve, into a vast and benign agency of public service, leaving to the barbarous past the “good old plan that he shall take who has the power” and replacing the law of the jungle as to public costs and benefits by the value-creating practice of volun­tary exchange. This is the way in which piracy be­came transformed into trade, and commerce re­deemed from the rule of force and rapine. And this is the way in which proprietorship in land can redeem government into its proper character as an agency of service on the basis of free exchange. Thus are politics and economics at last reconciled, government itself socialized, and society made safe and secure.

 

It should indeed encourage and even inspire the whole real-estate world to realize the happy truth that the owning interest in land, in the proper and effective pursuit of its own business and profits, should be able to come into such magnificent pros­perity and rewards and that at the same time, by the very nature of the social organization itself and without need for any sacrifice or pretence of altru­ism, it should also emancipate the arts and indus­tries by securing to all the liberty that is the key to security, the one great freedom that includes all lesser freedoms — to serve and to be served — the freedom of unpenalized production and exchange of services and wealth, with joy and abundance for all who choose to enter in.

Retrospect and Prospect

 

When populations migrate from lands of debts and deficits and high taxation to a land of slight taxation and no deficits, there is a phenomenal rise of land values, such as took place in North America in the nineteenth century.

 

These people brought with them no capacities or facilities for wealth production any greater, nor even as great, as they had in the old lands, but they did leave behind them the losses that the seiz­ing of their property for taxes had imposed and the crushing burdens that the mis-spending of those taxes to regulate their business and limit their em­ployment and production entailed.

 

With relatively free and untaxed production and exchange in their new land, so great became the need and demand and the ability to pay for neces­sary public services, principally the maintenance of internal peace and safety and ways of communi­cation for free exchange, that fabulous land values sprang up upon sites where this demand arose and these services were supplied.

 

But rising debt and taxation and increasing re­straints on business and production, financed by public debt and taxation, are now preventing em­ployment and so limiting production that the effec­tive demand — and the ability to use and pay for public services — fails, and land values no longer rise.

 

A great reduction or abolishment of coercive taxation, with its attendant and consequent evils, would have, upon the present population, the same economic effects as if it were to be transferred, by magic power and without inconvenience, to a still newer and freer continent already supplied with all the resources and equipped with every facility of production that they possessed in the one they left behind.

 

Such a release of productive power would bring forth unimaginable wealth, and the value of land would again leap to such further heights as we can but little more dream than could the simple Dutchmen of early New York.

 

Land value — the exchange value of public serv­ices — is a reflex of all other exchange values. It cannot create itself. It is determined by what the community offers for its net public services,— al­ways in terms of its own wealth and productivity. Without production there could be no rent or land value. With free and taxless exchange, and thus unrestricted employment and production, there are no necessary limits beyond which future rents and values may not be caused to rise.