Jeff Smith has for many years been working for social justice, economic equity, and ecological sustainability. His particular focus has been on the “land problem” and the appropriate basis for taxation. The result is an approach he calls Geonomics. For more information, see his Geonomy Society website.
Here’s what it’s all about. — t.h.g.
“Every community creates its own values, without even being able to help it. Indeed, most people aren’t even aware it’s happening. But watch what happens when new people move into a community, when a vacant lot is landscaped into a pocket park, when a school’s students raise their scores, when a parking lot entertains a farmers’ market. What happens is the nearby land values rise. Indeed, they rise enough that the poor grassroots activists who help bring about such a social improvement could work themselves out of their homes.
Nobel laureate William Vickery noted there’s never been a public improvement that could not pay for itself from nearby site values. Problem is, most agents for the public – the government – do not recover those values but let them collect in the pockets of speculators, developers, and lenders – or, in a phrase, their major campaign contributors. When a community leaks its own values out to absentee owners and investors and mortgagors, it makes it tough if not impossible to operate sustainably.
Homeowners, too, expect at some point to sell their homes and extract the equity, typically their only savings. And wearing a different hat, these same homeowners may agitate as environmentalists. But the value of land under homes in a growing community is a powerful lure. People do have a right to those land values – but an equal right, not an exclusive right. That is, your right to the value of the land beneath your home is no greater (or less) than your neighbor’s right to your land’s value; likewise, you have the same right to the value of the land beneath your neighbors’ homes. How can that be? It’s because none of us ever made any land and all of us contribute to land’s value. What are the three most important things in real estate? Not the building, which an owner builds or buys from the builder, but location, location, location, the nearby school, park, transit stop, commercial district.
How can our equal right to land value be effected? A bit like Aspen Colorado does now, much like almost all communities did at the beginning of history (note the words “own” and “owe” were once one). That is, residents would pay in a land tax or land dues and get back a land dividend (technically, a “rent” dividend).
Don’t expect it to happen over night. But a community could start by shifting its property tax off buildings, onto land. Indeed, dozens of jurisdictions have done just that (mainly in Pennsylvania, Australia, New Zealand, Taiwan, South Africa, and Denmark). When owners don’t have to pay a tax on improvements, they make more improvements; residents get to live in homes and neighborhoods that are more esthetic and comfortable. When owners do pay a tax or dues on the annual value of their location, then they quit speculating or procrastinating and convert vacant lots, parking lots, abandoned buildings, and other eyesores into useful structures or even parks.
Shifting the property tax is powerful medicine; every place that has done it has benefited. Considering just the bottom line, motivated owners attract more private investment, generating more job opportunity, spinning off higher wages. The new, well-sited development adds to the housing stock, making homes affordable. Considering the whole ecosystem, as long as you leave your metro region shot full of holes, you cannot physically curb sprawl and spare outlying farmland; you can’t shorten trips and cut traffic or get serious about hothouse gases. To sustain civilization as we know it, you need the efficient land use that geonomics delivers.
Unlike other taxes, recovering site values does not diminish the tax base but expands it. Were a community bold enough to set its land dues high enough, it could not only eliminate the counterproductive taxes on labor and capital, on wages and sales, it could also pay residents a dividend. And if people were to receive a dividend, they could afford to get by with less government. Government could lose some of its bureaucratic overhead, saving taxpayers even more money. Society could attain the Jeffersonian ideal of governing least being governing best.
Any community could take the first step of shifting its property tax off buildings, onto land. More precisely, onto the socially-generated value of land. It’s something we all create and all deserve, being the monetary version of the commons.”