Land Tax and Land Rent
Six dollars taken from your land tax adds six dollars to your net income. Capitalized at 6% you now have an additional $100—The Forum, Stockton, Calif.investedin that land. Your banker will tell you that you should now raise the rent on your tenant. As rent is figured at (say 12%), that cut of $6 on your land tax calls for $12 more rent. That raises the cost of doing business on that land; as a result, prices go up.
It seems that the six dollars saved by the owner is the interest on this $100 increased value, and to soak the tenant for $12 more means 18 per cent. In other articles the Forum has truly said that tax or rent increase on farm land can't be passed on to consumers.
In Iowa, with a $6 average acre rent, the tenants made 41c net per acre. Lower taxes $2 per acre, according to the Forum they would have to pay $6 plus $4 or
or $10 per acre rent. That is, they would have to pay $3.59 loss per acre for the blessed privilege of living on farms and working hard all year.
Rent in Iowa and Illinois is about 4 per cent of the value of the land. Many tenants lease for 5 years and agree to pay a fixed rental PLUS TAXES, and any change in tax levy affects them favorably or unfavorably.
Lowering the tax would benefit these renters to the amount reduced, making it possible for them to reduce prices on products.
The renters can't raise prices on products to meet increased rent (speaking of farmers). The prices are dictated to them.
But suppose they could, and suppose that increased rent were added to prices, and (logically) that decreased rent made prices lower. Let us see what it would mean:
In Iowa 53 per cent of the farmers own their farms, and 47 per cent are renters.
tax of land mean the same, with this distinction: Tax is a compulsory payment to the State, while rent is a payment from one private citizen to another as mutually agreed upon—a matter of free contract.
Tax to the owning farmer is the same as rent to the tenant farmer. A raise in tax on the 53 per cent would increase the cost of farming and mean higher prices, if the Forum's statement that higher rent would raise prices is true.
A lowering of the tax would have the opposite effect; that is, lower prices.
Rent charges are not increased as taxes are lowered, nor decreased as taxes go up. The very reverse is true. I place my positive knowledge, gained in actual, personal business experience, against the error of
California's most illustrious son.
The lower the land tax, the higher the cost of living, the slower is business, and the more common is poverty and crime. (Read Progress and Poverty by California's most illustrious son, Henry George).—The Forum.
That is as absurd as to say that a dog turned loose in a meat shop would starve.
Speaking from personal knowledge of this part of the country, that statement is not true. Land tax is 200 per cent higher, the cost of living is twice as high, and crime and poverty are more prevalent than several years ago. Business was as brisk, considering population and facilities, then as now, or more so.
The statement seems to be based on a reversal of cause and effect, in which the result or effect is viewed as the cause, and the immediate cause viewed as the effect.
Taxes come after the fact. When there is little property and few industries, people live in a more primitive condition, which may be viewed as
poverty. Business is necessarily slow, and land tax low because people have neither wealth nor money to pay as taxes. When the country builds up, business increases, people become less
primitive and taxes go up.
No amount of land tax will cause a terrible avalanche of prosperity. Taxation means poverty and slavery.
Taxing the non-using owner so highly that he gives up title looks like a good trick, but confiscatory taxation on legal property or legitimate business is unconstitutional, and would hurt the rightful using owner as well.
Why not make bona-fide occupancy and use by the owner necessary to validate title?
That would end landlordism.
To transfer the title of landlord from private individuals to a bunch of politicians is no remedy.
No matter who the landlord is, the renter is the goat.