SWOT Analysis

Land Value Capture

"Strengths, Weaknesses, Opportunities, Treats" Analysis

Overall Land Value Capture SWOT


In economics “rent” is defined as payment in excess of necessary supply price. Since the supply price for land is zero, as it is a gift of nature, any payment for land is rent. Land value capture is a method of returning land rent to the public sector. It is an equitable, efficient and sufficient form of public finance.

The classical economists had a clear understanding of how and why land values increase as population increases and society develops. David Ricardo was the first to formulate the Law of Rent, building on ideas of those who preceded him. He wrote that, when an economy is growing, “rent is not only absolutely increasing, but that it is also increasing in its ratio to the capital employed on the land.”

Adam Smith and Henry George asserted that gains in land value/rent, generated by the efforts of the community as a whole, should be captured for the benefit of the community as a whole. George, in his book Progress and Poverty, explained how the failure to capture increase in land values for public benefits eventually and inevitably results in significant market distortion, severe maldistribution of wealth, and numerous social problems.

Neo-liberal economists eliminated land as one of the three factors of production, subsuming it into capital. They base their arguments on only two factors, labor and capital. Their variety of economics also discarded important concepts about what happens to land values as market economies progress along with the understanding of the root causes of the wealth divide. (For more information on this topic see The Corruption of Economics by Mason Gaffney and Fred Harrison.)

The theoretical and analytical insights of classical economists concerning land and land values hold important keys for how to harness market forces to more readily secure affordable access to land, hence enabling people to procure adequate shelter and fulfill other basic needs. Correcting market distortions by capturing land values for use by the public sector while reducing or eliminating taxes on labor and production, is a major one of those keys.

The Law of Rent explains how land values and consequently housing costs rise faster than wages, to the point where all advances in technology and wealth production inevitably push more and more workers to mere subsistence living conditions and worse. We see the situation quite clearly now in developed countries where, for most people, housing can only be owned by means of mortgaging, which means long-term, compound- interest debt, with a steadily escalating portion of the individual¹s income or wages going toward monthly mortgage payments. Those who rent housing live, for the most part, at or near subsistence levels, with little or no savings. Renters pay approximately ten times the cost of their rental unit over the course of a lifetime.

Developing countries must guard against replicating this system. They can instead move forward with properly harnessing economic incentives for both efficiency in wealth production and fairness in wealth distribution via land value capture policy.

Land economists estimate land and resource rents to be 30-40% of Gross Domestic Product (GDP). Yet worldwide, 94% of taxes fall on labor and productive capital, on average, with less than 6% on land and resource rents. The property tax, historically levied primarily on land value and a major source of public funds, is now a relatively small tax in most countries compared to income and other taxes. And within the property tax as currently structured in most places, around 70% of the taxes are assessed on buildings and just 30% on land.

Economists who specialize in property taxation tend to agree that the virtues of a tax on land values are contradicted, if not negated, by a high tax on improvements. They regard taxing improvements as a disincentive to construction and maintenance and an incentive to hold unimproved land off the market, leading to artificial shortages of land. Such a tax imbalance sets up a dead-weight loss for production in general and impedes further improvements. An enormous amount of socially generated economic surplus, in the form of increases in land and resource values, is essentially unearned income, captured by a few when, of right, it should be captured for the many.

Land value capture is essential in order to “recover public investments” called for in the Habitat II Action Agenda and also in Habitat I. Well planned, skillfully implemented public investments in transportation and other infrastructure improvements result in higher land values, which, if captured, are nearly always enough to pay for them. Thus the public – society as a whole - receives back the higher value created by public expenditure.

As for the private sector, if infrastructure improvements are made by private investment, then that sector can capture land values up to the point where the investment is repaid. Such improvements, therefore, will have been made with no public debt whatsoever. The increased productivity of those now living in improved locations further increases the land values (land rent) of such locations and thus this increased, socially generated value should be captured by public authorities for funding of additional public benefits.

When a society captures land value, land does not disappear, but becomes more affordable and available to those willing and able to put land sites to good use. But if we tax wages and profits too heavily then labor and productive capital will indeed disappear. Capital deteriorates and increasing numbers of those willing and able to work become destitute and vulnerable to homelessness and starvation.

When full land value capture is reached (most land economists assert that full land value capture is achieved when 10% of the capitalized value of land is recovered) the land tenure system becomes essentially a “pay for benefits received” system. Those with the best and most valuable land pay the highest fees for its use, protection, and infrastructure benefits. Private land use is thus conditional upon payment of fees to the public at large according to the desirability of particular sites. The more efficiently individuals, groups, and businesses use their land sites, the more advantageous is this to the community as a whole. Viewed in this way, a land value capture system synergizes the values of both fairness in land access and efficiency in land use.

Substantial evidence exists, from even partial implementation of land value capture around the world, to demonstrate that land value capture works in practice as well as theory. Historically, public recovery of land value was used consciously by various governments for various purposes. For example:

  • Hong Kong and Singapore targeted land rent via land lease systems; at the time of their founding, there was not much else to constitute a tax base. A significant amount land value continues to be captured via this approach, though currently full land rent is not captured by the public sector.
  • Indeed, all the “Asian Tigers” have more experience with recovery of land value than the mainstream literature usually gives them credit for. In fact, the results from their taxing land probably has as much to do with their success, if not more so, as does their more-noted public/private partnerships.
  • The state of California, USA, via enabling legislation permitted localities to tax land, not improvements, in order pay for irrigation and other infrastructure. The result was that enormous tracts of underutilized land was sold at affordable prices, thus giving land access to those willing and able to use land for agricultural production.
  • Australia and New Zealand likewise chose to tax land, not improvements, in order to break up enormous ranch land tracts that kept out farmers. Sydney, a world-class city by any standard, still does tax land to a significant degree as do some other cities around the world.

Our Land Rights and Land Value Capture program includes a number of SWOT analyses of historical examples of land value capture applications from around the world, including Australia, Argentina, California, USA, Denmark, Hong Kong, Jamaica, Pennsylvania, USA, Singapore, Republic of South Africa, South Korea, Taiwan, Tsingtao, China, and others.

Land value capture is called for in both UN Habitat I and Habitat II Action Agendas. Habitat’s Global Land Tool Network considers land value capture to be a key policy for funding infrastructure and public services as well as for meeting the Millennium Development Goal of significantly improving living conditions for at least 100 million slum dwellers by 2020

The Vancouver Action Plan – the 1976 founding document for UN Habitat – states: Social justice, urban renewal and development, the provision of decent dwellings and healthy conditions for the people can only be achieved if land is used in the interests of society as a whole…. Excessive profits resulting from the increase in land value due to development and change in use are one of the principal causes of the concentration of wealth in private hands. Taxation should not be seen only as a source of revenue for the community but also a powerful tool to encourage development of desirable locations, to exercise a controlling effect on the land market and to redistribute to the public at large the benefits of the unearned increase in land values… The unearned increment resulting from the rise in land values resulting from change in use of land, from public investment or decision or due to the general growth of the community must be subject to appropriate recapture by public bodies (the community).


Land value capture promotes affordable land access by discouraging land hoarding, land speculation and land price escalation. Unemployment and wage slavery results when people are locked out from affordable, potentially productive land. People with access to land cannot be easily exploited. They can, if they wish, be self-employed.

But where this option is closed, people can be exploited and oppressed. Where land is owned by only a few and where land value is captured by the few who hold the best and the most land, these few individuals grow enormously wealthy from the surplus funds accruing from rising land values. They usually then invest this unearned income in capital and financial instruments that collect interest from the indebtedness of the many who lack access to finance capital and/or land resources. Ownership of both productive capital and finance capital, like ownership of land, thus becomes concentrated in the hands of a few, expanding the gap between the very rich and the rest of the people. Land value capture is thus a key policy promoting fundamental economic justice starting with fairness at the root of economic production – land access.

Wage and other labour taxes can and should be reduced as the amount of land rent captured for public benefit increases. Lowering income and wage tax burdens on people automatically raises their purchasing power. The combination of affordable land and greater purchasing capacity results in greater access to land (effective demand) for housing and basic needs production, and much less need to borrow and incur debt. Land value capture in this way encourages work and production while discouraging land hoarding and land speculation.

When land is treated as a profit-making market commodity, not as humanity’s birthright, people eventually come to be treated as market commodities. Hence the terms “labor pool” and “labor market” and the voicing of concern about “labor costs.” Land value capture is a basic, essential reform to establish fair market economies which benefit society as a whole. Land value capture curtails the exploitation of working people and establishes a truly level playing field of equal rights to the gifts of nature.

With a sufficiently robust land value capture system, the consequent affordable land access enables working people and those seeking work to gain power from which to negotiate higher wages. People literally have a place to stand from which to leverage themselves. This is why it is important that land value capture be implemented on both urban and rural land, especially where rural lands are held by only a few large landowners. Just as people migrate now to cities to find cash employment, they should have the option to return to rural areas to gain direct access to productive land. Renewable energy and global information technologies, combined with ecological village development programs, are making the rural return option both viable and attractive.

Land value capture fills public coffers without emptying private pockets. Because charges on land value tap into a surplus – the “economic rent” of land – land rent recovery raises public revenue without depriving citizens of their earned income or savings. Furthermore, land value capture makes possible the elimination of taxes on people’s homes and other buildings, wages, sales and businesses.

Land value capture promotes government efficiency and good urban planning. Sprawl is curbed and highest and best use of land is furthered by directing development to areas already serviced by roads, utilities, sanitation and other infrastructure. With more compact development, public transportation and other public services can more easily and affordably be built and maintained. This is of vital importance at this time as oil and other non-renewable energy prices continue to rise and thus increasing transport and energy costs.

A public sector, adequately funded by land value capture, can more readily pay not only for needed infrastructure but also for education, libraries, protective services and basic health care. Such public expenditures promote overall economic development. Public parks and other green space increase values in adjacent areas and encourage urban welfare through recreation. Thus as public benefits increase, land value is recycled back to the public at large forming the basis for a self-renewing city or region with little or no need for public indebtedness.

A transparent, well managed system of full land value capture might also utilize a portion of such funds to generate low-interest, revolving loan funds for housing construction, thus furthering access to shelter for all. With a citywide land value capture system, for example, a portion of these funds can be placed in a soundly administered housing loan fund available to individuals and private sector builders alike. If loan repayments are not forthcoming then the government would acquire the property for resale. There is additional security for the public sector when investing in building housing because successful development increases land values. Even if a few people default on repayment, the government still reaps the benefit of overall development through increased land values which can then be captured for public benefit.

Another practical option for governments using land value capture is that bonds for housing or infrastructure loan funds can be issued and repaid by capturing the increased land values which result from such improvements. This has clear advantages in terms of overall balanced and equitable economic development over systems which repay bonds from taxes on labor and productive capital.

The reality is that full collection of land rent would yield a substantial amount of public revenue, potentially so much so that a portion could even be distributed in direct “citizen dividend” cash payments, similar to how the US state of Alaska distributes annual individual dividends in amounts representing each Alaskan’s equal share of that state’s investment earnings from its oil profits (resource rent) investment funds.

Land privatization is not necessary to implement land value capture policy, which accommodates a variety of forms of land tenure. Tribal, clan, and extended family land bases can remain intact with a land value capture system, by constituting communal lands as types of leaseholds.

Land value capture is strategically important for the political, economic and social empowerment of women. There are enormous historical and present day gender disparities in land tenure worldwide. The largest and most valuable individual and corporate landholdings are predominantly owned and controlled by men. Public funds generated by land value capture would come primarily from these lands. Secure land tenure, affordable land access, and a fair, transparent, orderly system of public finance, all promoted by land value capture policy - strengthen women’s power and decision making capacities.

Land value capture, as a locally implemented public finance system, furthers decentralized, democratic decision-making power over how public funds are spent as well as transparency in how funds are raised, both of which put a brake on public corruption. The land value capture system is also simpler, easier, and cheaper to implement than other types of public revenue generating systems.

Financially, land value capture is the primary method by which members of society can recover the value of their land and natural resources, this recovery or capture being necessary in order to share those values. As long as citizens pay in rents to the public treasury, then the money cannot collect in the private pockets of landowners and land speculators. Once in the public treasury, then government can fund needed infrastructure improvements and eliminate other taxes that are counterproductive and make it harder for people to produce real wealth. As people grow more productive, they drive up the value of land in commercial areas, so by recovery of those higher values government would never lack funds. It could thereby stay out of debt and preclude inflation. Furthermore, a frugal government could use the surplus public revenue to pay residents a “citizens dividend”. Enjoying that financial cushion would make it easier for people to either negotiate higher wages and better working conditions or to start their own business.

Socially, land value capture reinforces equality. People would pay in an amount equal to the value of the land that they claim for exclusive use. In effect, they’d pay their neighbors for exclusive use of some portion of land. Those who claim the best would pay the most. Having to pay rent to one’s community prevents the concentration of wealth and the creation of class. When people are at par economically, they tend to regard each other as equals and treat each other much better, making criminal acts rare. And if government were to pay citizen dividends from a portion of the recovered land rent, then equality of social and economic conditions would be further enhanced.

Environmentally, land value capture motivates landowners to use their land efficiently. As each person uses less land, or gets more output from their land, then society as a whole need use less land overall, which spares the more pristine areas. Efficiently used urban land curbs sprawl and promotes highest and best land use enabling the provision of infrastructure at lower costs. Also, paying land rent to the public treasury discourages land hoarding and enables owner occupancy. Owner occupants tend to treat their land better than do absentee owners, thus lessoning the need for society to pay to enforce environmental land use laws.

Politically, this approach to funding infrastructure and public services has appeal for most all the major players. When people understand it and are given the opportunity to vote for it, the majority chooses to move forward to implementation. Politicians who are truly working to improve conditions of society can work together beyond party identification to get the reform passed into law.

The proposal to build infrastructure and to pay for it by recovering the resultant rise in land value, for instance, is easy to explain and considered to be fair by nearly everyone. The research of Nobel laureate William Vickrey clearly showed that there never has been a desired public improvement that could not have paid for itself by recovering the increase in surrounding land site value. (See “William Vickrey – Contributions to Public Policy” by Richard Ar nott, Department of Economics, Boston College, October 1997, page 19.)

Land value capture, when robustly implemented, can break up huge and unjust concentrations of underutilized land. It can do so without losses in efficiency or creating debilitating resentment. Other approaches to agrarian land reform often lead to bloodshed or reduced output per acre and leave society divided into hostile camps. The bottom line Is that land value capture can pay for infrastructure and at the same time enable a peaceful land reform with rising agricultural output.


Too few economists understand the importance of land as a factor of production, especially in a complex market economy. They have not been exposed to the significance of the “law of rent” or to how flaws in market systems, such as the inability to provision basic needs for all and the increasing maldistribution of wealth, can be corrected via public capture of land rent while reducing taxes. Without trained land economists to advise them as to how to properly harness market forces of supply and demand, public officials and the people as a whole are at a loss as to how to address these market distortions.

The law of rent may not be recognized by some economists, but it is understood by investors. Anticipation of higher land values as development proceeds encourages them to purchase land for speculation, a form of land hoarding. Those who engage in “rent-seeking” – the private appropriation of land value – are often a formidable force lobbying governments not to implement land value capture and spreading misinformation about this policy approach. For instance, they may try to convince homeowners that they would have to pay more under a land value capture system than they do with wage income taxes. Or they might tell public officials that land value capture is an insufficient source of public revenue. Public officials who themselves are engaged in rent-seeking activities tend to work against implementation.

Fortunately, information technology can now be utilized to give the citizenry accurate information about the benefits of this approach and specifics as to who would pay more and who would pay less if this system of public finance were to be implemented in a specific location. Information and communications technology can also help determine which public officials and government lobbyists derive or hope to derive profit from the private appropriation of land rent.

Land value capture can be difficult to adopt because for most people it is not an obvious and clear idea but one that requires some explaining. It is not immediately apparent how and why it works and why it is fair. Yet popular understanding and popular support often determine whether or not government will adopt a new reform. Time, attention and human and ideally some financial resources must therefore be devoted to public education for it to be implemented with popular support and for it to remain in place once adopted.

Some people, upon learning of its stellar real-world results, react that it must be too good to be true. Or they say, if it works so well, why isn’t it more widely accepted? It’s as if the reform should not have so many benefits in order to win over more adherents! The only way to respond is to explain the ethical and rational basis for the policy and to do the preliminary research in order to demonstrate the specifics of its implementation in a particular city or region.

Another main obstacle is that some people see any payment to their government as a tax, a confiscation by politicians, for as much money as they can squeeze out of citizens, to fund programs of questionable value or even to be consumed by corruption. What might change that perception is that proponents could earmark the funds for specific projects and pledge the surplus to an annual cash dividend to be paid to area residents.

When the decision to implement LVC is made, if the government moves too slowly the momentum can be lost, or if the government recovers too little land rent it can appear that this reform is ineffectual. With lack of transparency and insufficient public awareness, even the best public policies are vulnerable to corruption.

Socially, care must be taken and adjustments made if need be in order to make certain that land value capture does not negatively impact vulnerable people. There are a number of ways to do this as detailed in GLTN land value capture documents on implementation.

Environmentally, in that LVC does stimulate economic growth where needed, the growth could spin off more pollution, if government fails to enforce people’s right to a healthy environment.

The recovery of rent has not encountered any economic problems, as long as the collection agency, typically the local government, does its job properly. Government must not try to take more than the actual amount of rent. Also, government must make sure to uphold environmental protections, so that landowners and their investors do not over-develop in sensitive areas, such as along riverbanks or on steep hillsides.

One perceived weakness – not an actual weakness – is that it would be difficult to appraise the value of a location. However, this is a task that private parties accomplish all the time when selling or buying or leasing or renting land. And some governments asses land rather well. The Canadian province of British Columbia has a reputation for doing a good job. Foreign assessor come from all over the world to study BC’s assessment practices. Australia also has jurisdictions and private firms that do this job well. So the land assessment and land value capture techniques are available for others to learn wherever they are on the globe.

One challenge of recovering rises in rent to fund new infrastructure is to determine how much of the rise in rent is due to the new infrastructure. Many factors increase site value, such a growing population, general rise in income, decrease in crime, decrease in taxation, etc, as would two improvements to infrastructure, say, a new dam and a new highway, in the same area at the same time; determining which contributes how much to the increase in area land value is problematic. One solution to recovering too much rent is simply to be sure to always recover less than all that is available, leaving some rent available for recovery by other public agencies or leaving a small portion in the pocket of the landowner.

Another challenge is what to do with the larger flow of land rent once the infrastructure improvement has been paid for. Often, government fails to recover the bountiful rents. That leaves the higher rents in the hands of landowners. Those who are allowed to privately appropriate the land rent then too often contribute to politicians who pass legislation to repeal public recovery of land rent. Thus, the very success of early rent-recovery sometimes makes it difficult to continue with this method of public revenue generation. One solution might be to pay residents an annual citizens dividend from a portion of land rent so they would have a strong and personal motivation to support the sustained use of this policy.


With the problems of climate change, rising energy prices, the extreme and growing worldwide wealth divide, the sub-prime mortgage crisis and other breakdowns and shortcomings of the capitalist banking and economic system now apparent to nearly everyone, this may be an excellent time to bring forward land value capture as a fundamental policy approach that can address many of the social, economic and environmental problems of our times. The fact that all UN member states have recommended this public revenue approach by consensus as stated in the UN Habitat I and II Action Agendas can provide impetus and legitimacy for its adoption by public authorities throughout the world.

The great advances in the use of computers for public record keeping and for maintaining up-to-date land value assessments along with other forms of information and communications technology provide enormous opportunities for the successful implementation of land value capture.

Financially, land value capture offers an opportunity to build the basis of prosperity for an entire society. By aligning economic incentives, land value capture prods people to make productive use of valuable land sites while the removal of tax on effort fully rewards people for their work and accomplishments. Since most people strive for a better material existence there should be a receptive audience for this public finance policy.

Socially, land value capture presents a key to equality, another virtue that humans are hardwired to appreciate. It’s quite natural for all of us to want to be treated with respect, as an equal, and to see others treated that way, too. Land value capture is a way to level class and lift up the most humble. Perhaps one of the best ways for this policy to have immediate support and impact on the poorest members of society would be to distribute a portion of the captured land rent as direct citizen dividends.

Environmentally, land value capture is a powerful tool to conserve resources and rescue the planet. It spurs people to use land in the most efficient ways possible, thus decreasing the energy costs of transport, curbing sprawl development, and promoting farmland cultivation closer to cities. If at the same time taxes are removed from labor and capital, then entrepreneurs can more quickly move cutting-edge renewable energy and other planet-saving technologies into the market, eliminating the pollutants that are wrecking the planet.

The opportunity to recover resultant rises in land rent to fund improvements in infrastructure is substantial. The need for public transportation, water and sanitation, and repairs to roadways and bridges is vast. Paying off government bonds for such projects via rent-recovery makes the bonds more secure and thus more attractive to investors. If the bonds are more secure, then the government selling them can lower the interest rate they offer on the bonds and thereby save money. Hence a government that is mature enough (that is, has a reputation for honesty and ability) to enter into the bond market should logically be quite interested in land value capture policy.

Since infrastructure is the necessary under-girding for development and prosperity, it seems logical that all the players in the development arena would also warm up to rent-recovery – all the business sectors involved in real commerce and not just “rent-seeking” the families wanting homes and clean water, and other beneficiaries of functional infrastructure. Another sector who might welcome “geo-bonds” – government bonds paid back via value capture (earth’s worth) – are the local rich who would like to keep some (if not all) of their savings in their home country (rather than in Swiss banks, for instance). If government bonds were secure – and made secure by repayment from rising site rent – then there would be less capital flight and more domestic savings. Countries with newly emerging economies could eventually develop their own markets for stocks and bonds.


Financially, land value capture is threatened by the business cycle. When business is booming, it seems nobody wants to rock the boat by making any fundamental changes. When times are bad, people go into crisis mode with little time to consider deeper dimensions and policy solutions. Ironically, land rent recovery for public benefit would smooth out the boom/bust phases of the business cycle replaced by a soothing climb/glide cycle, more like breathing or the natural cycle of the seasons.

Socially, this policy approach is mainly opposed by those few – mainly real estate speculators and owners of particularly large or valuable areas of land - who would pay more land rent into the public coffers. Often when proponents bring the idea into the public dialog, those who want to retain land rent for themselves either ignore the proposal or argue strenuously against it, using all the usual false claims. If broad society understanding and support for this policy is lacking, land rent-seeking opponents will rally their forces to oppose, reduce or eliminate this approach to public finance and fair wealth distribution.

Many people might not immediately see any connection between this policy and improved living conditions. If the policy is not sufficiently understood by the populace it is at risk of being rescinded, in which case people would suffer economic deterioration as a result, which is what has happened previously when the policy has lost momentum.

Environmentally, land value capture policy implementation is hindered by stories of how a cousin tax, the property tax, pressures poor landowners to sell out prematurely to developers. Land value capture should first be implemented in urban areas, which would absorb most needed new development, before applying it to an entire region. Thus the the land value capture fee owed by rural landowners would likely be less than the taxes that a typical rural landowner now pays. This would decrease development pressures, retain open space, and enable more viable small farming operations.

But the main threats to public capture of land rent are two. One, most people do not know it or understand it or are not interested in such issues so that this powerful tool too rarely gets a fair hearing. We have addressed this issue in the “weaknesses” section. The other threat is that whenever some political players do propose this public revenue approach and succeed in getting some version passed into law, then landowners oppose it.

The landowners in opposition could be rural owners of latifundia in Latin America or urban homeowners in Anglo America. The former are already rich by their national standards due to retaining rents and feel no compulsion to share their unearned gains. The latter, middleclass homeowners around any major city around the globe, are not rich from rent but have no savings and need the value of the land under their homes to qualify for loans, to send their children to college, and to retire upon selling their empty nest and moving to a smaller home in an area of lower site values.

Large landowners wield significant political power in most nations. Public officials too often do their bidding, not the bidding of idealistic reformers. Large landowners have opponents, but they are sometimes opponents with an agenda of force, of either violent revolution or forceful redistribution of land. Very few – outside of some open-minded activists, academics, and government officials – are listening to the idea of leaving land titles in place while charging landowners the annual rental value of the land they keep others from using, while removing other taxes.

To mollify the large landowner, proponents should always tie rent-recovery to tax-abolition or at least to substantial reductions of taxes on people’s efforts, on buildings, businesses and income, thus encouraging land hoarders to use their land in ways likely to promote local employment and local production.

To mollify the small owner of a plot beneath a home, proponents should emphasize the fact that tax on their home and improvements to their home would be substantially reduced or ideally completely eliminated as part and parcel of this reform. The house itself would retain full value. Elimination or sharp reduction of taxes on income would enable homeowners to save a significant amount personal funds from earned income. Homeowners also should be informed about the generational equity issues. Since land value capture promotes housing affordability, the children and grandchildren of current homeowners will more easily be able to afford their own homes with this policy in place.

Another threat could come from lenders who make most of their profit off mortgages which typically cost a borrower at least twice the selling price of the home-plus-land. Since land value capture stabilizes and most often reduces the price of land, and reduction of taxes on income increases savings and purchasing capacity, home buyers and those seeking other types of loans would not have to borrow so much and consequently banks would not make as much in interest payments. It is possible, however, that as poverty is lifted ad prosperity spreads, there could be an increase of effective demand for loans for homes and productive enterprise.

Lastly, a threat to this policy approach could come from economists and academics who do not want to see their discipline simplified so that the general populace could understand it, making them feel less special and less knowledgeable. This is known as the “priesthood syndrome” since in the past the priesthood did make literacy in general illegal. Or an academic or reformer could have a pet proposal that they may hope to advance by derailing other proposals, regardless of how beneficial other ones may be to society, as land value capture.

This SWOT analysis was written by Jeffery J. Smith, founder of the Geonomics Society and Alanna Hartzok, Co-Director of Earth Rights Institute for use by the UN Habitat Global Land Tool Network’s program on land rights and land value capture.


by Fernando Scornik Gerstein


With 2.791.8101 Square Kilometres of surface Argentina is one of the largest countries in the world and with 36.223.9472 inhabitants one of the comparatively less populated. The actual ratio of inhabitants per Square Kilometres, 13, is one of the lowest in Earth.

In spite of being as a whole an almost empty country, the population is mostly concentrated in an about the city of Buenos Aires and some other few large cities like Córdoba and Rosario (about 12.000.000 people).

Being a country with such an abundance of land and so few inhabitants, nevertheless large sectors of the population live in slums surrounding the big cities, with no access to land.

This situation moved the Catholic Church to issue recently an Episcopal Document about the land problem in the country, proposing different solutions. In the foreword to this document Monseñor Carmelo Juan Giaquinta points out that the relation of the Argentineans with land “is maybe one of the worst in the World”.

Really it is like that, but it should not be so if we look at some of the circumstances of Argentinean history.

Many of the founders of the country in early XIX Century were physiocrats, including General Manuel Belgrano, one of the National Heroes and Bernardino Rivadavia, its first constitutional President. May other prominent figures were imbued by physiocratic ideas. The physiocrats were popular French economic philosophers during the second half of the 18th century. They held that land and productive labor were the primary factors of production and advocated the “impot unique” – a tax on land.

Although the official independence from Spain was only declared in 1816, the country had been in practice independent since the 25th of May 1810 revolution.

Already in 1812 the provisional government issued a decree forbidding the sale of Public Land. But it was in 1827 under the Presidency of Bernardino Rivadavia when a formal law was passed – the law of Emphyteusis – stating that public land3 could only be leased for twenty years periods paying to the State a canon of 8% on the assessed value for cattle raising land and 4% for agricultural land.

The law was excellent and if it had prevailed, Argentina would be now – as it was until 1920 (when free land, was still available) - one of the richest countries in the world. But it did not prevail. Rivadavia was a “Unitarian” supporting the idea of a centralized government which could impose progressive policies. He was defeated by the “federals” a loose alliance of provincial leaders (caudillos) that rejected his ideas.

Rivadavia was force to resign, the Law of Emphyteusis was denaturalized and slowly abandoned, permitting the creation of large estates or “Estancias”. Finally the Law was officially repealed in 1857 and the progressive ideas of Rivadavia were forgotten until 1917 when a Uruguayan Scholar, Andrés Lamas, published a famous book: “The Economic Work of Benardino Rivadavia”.

Argentina fell into the domination of an agrarian based oligarchy, but the existence of so much free land secured the country’s economic progress until the 1920s. It is by then that massive migration caused an increase in land values, that without proper taxation has been since – in general lines – the feature of the country.

Nevertheless there were attempts to impose land taxation, mainly under the influence of the Civil Radical Union, a Centre political party, which although facing enormous resistance by the ruling classes, imposed a moderate land taxation scheme in the Province of Córdoba under the Radical Governor Amadeo Sabattini and in the Province of Entre Rios, also under a Governor of the Civil Radical Union. Unfortunately these were only provincial measures. Since the 1930 military coup that overthrew the Constitutional Radical President Hipolito Irigoyen, the Federal level of the country was ruled by the Conservative Party using fraud and violence in the polls.

There was also an attempt to impose urban land value taxation in the city of Buenos Aires in 1923 by the Radicals and the Socialist, but the law – initially approved – was repealed in the same year.

In 1921 a “Liberal Georgist Party” was created, based on the ideas of Henry George, but beyond some local electoral sources it failed to gain national support.

In 1943 a military coup – with notorious fascist influences – defeated the fraudulent Conservative Government and under the influence of general Juan Domingo Perón engaged in a program of reforms that gave Perón popular support. In 1945 Perón won the elections and was elected President, engaging almost immediately in a nationalistic and autarchic program that after some few years of bonanza put the country on its knees.

Perón – who in the early years had the support of some advocates of land taxation like Antonio Manuel Molinary and Mauricio Birabent – never undertook any serious program of social or taxation reform. But he did one important thing: he frozed urban and agrarian rents and in the midst of a process of inflation this caused a massive transfer of income from the landowners in favour of those who rented land from them.

According to our opinion this action – jointly with some important social laws – was the reason for the permanent popular support of Perón.

Perón was deposed in 1955 and after that there were no significant efforts undertaken to impose land taxation until 1969 when a military dictator, General Onganía, enacted a law imposing a 1.6% annual tax on the capital value of agrarian land.

Unfortunately, Onganía was quickly deposed and the law abandoned, although under its influence Argentina had the largest harvests in many years. Apparently even this small land tax was an incentive for agricultural production.

In 1973 the author of this paper was called by the Argentinean Minister of Economy, Dr. Aldo Ferrer, and asked to draft a project for rural land taxation. The project – in which I proposed to tax all land and not only rural land with an annual tax of 2% of the value of land – was published by the Ministry of Agriculture, but never implemented.

There were also other laws taxing the “potential (imputed) rent of agrarian land”, at quite low taxation levels, but they were never really enforced.

In recent times Héctor Raúl Sandler, leader of the Union of Argentinean People – a centre party – was an important advocate of land taxation. Persecuted by the military government he went into exile, then returned to Argentina where he continues to be the leading figure advocating land value taxation in Argentina.

In 2001 the author drafted a new program of tax reform, based on a land tax of 3% on the value of urban and rural land. The project has been “under study” by the National Government since June 20054.

The actual situation is that land taxation as such is virtually non-existant in Argentina. There are no taxes on capital gains from land and no transfer taxes.

Only the municipal taxes collect - with substantial differences in its rates according to the different provinces – some rent of land although the taxes always fall on land and buildings jointly.


The strength for a land taxation policy in Argentina comes from two sides:

The Law of Emphyteusis of Bernardino Rivadavia is known and Rivadavia is considered one of the greatest Argentinean statesmen.

Also the progressive government of Amadeo Sabatini in the province of Córdoba – who imposed land taxation – is highly considered. Furthermore land tax ideas always had important followers in Argentina – some of them supported general Perón in 1945 – and in the Peronist movement there always has been a knowledge that freezing the rents paid to landlords during the Perón era was one of the secrets of his popular support.

Taxing the “imputed rent of agararian land” has had and continues to have a certain degree of political support within the Argentinean main political parties.


The land problem in Argentina is so acute that as soon as a possible solution is explained it calls the attention of the general public, both in the countryside and in the cities.

The actual position of the Catholic Church is extremely important because for the first time in history it has pointed out the serious injustice concerning the relationship between the people and the land of Argentina. The position of the Catholic Church – which has undoubtedly great influence over vast sectors of the population – is of extraordinary importance and gives opportunities for those favouring land taxation.

Another important fact in Argentinean reality is that the military – after the terrible repression during the last dictatorship that ended in the disastrous Falkland War that finally pushed the militars out of Power – are not in conditions to engage in military coups, which had been a traditional way for the Argentinean ruling classes to stop reforms introduced by governments.


The main barrier to introducing a land taxation scheme in Argentina derives from the absolute ignorance of the Argentinean political leaders concerning the importance of the land problem.

In the recent national elections – won by a faction of the Peronists that has made Mrs. Cristina Kirchner (wife of the former President) the new President of the country – none of the presidential candidates or the political parties supporting them had land taxation – even a modest one – in their manifestos.

The political parties – except those of a rather insignificant extreme left inclined to communist type “solutions” – do not speak of the land problem at all. There is a popular knowledge of the land problem, but this is not reflected within the political elite.

The city of Buenos Aires is surrounded by slums. Even the police do not dare to enter some of them. But this extraordinary reality – that so many people are squeezed into a small amount of land in a relatively empty country - seems not to have caught the attention of the politicians. They prefer to look at any other cause of poverty rather than direct their attention to the root cause – the land tenure system of Argentina.

Unfortunately this ignorance of the politicians is matched with a similar one of the scholars who tend to ignore totally the existence of a land problem. Even the ideas of Bernardino Rivadavia are not a subject of study in the Argentinean Universities.


There is also a threat. This threat comes from the always powerful Argentinean landed-oligarchy that clearly knows the subject and would deploy all efforts to stop land taxation.


1. Counting only Continental Argentina, excluding the Antarctic and South Atlantic Areas which are in dispute. Including them the surface would be of 3.761.274.

2. 2001 census.

3. In those years almost all the land in the Country was in the Public Domain.

4. Both projects of Fernando Scornik Gerstein have been recently published in Argentina in a book called “Tenencia de la Tierra para una sociedad más justa”. Edited by the Instituto de Capacitación Economica”





  • ability to calculate national land values
  • framework for implementation provided by existing local government rating base
  • evidence of efficiency of Site Value (SV) v. Net Annual Value (NAV) rating:
    eg. acreage under all crops
    Depression Period 1929/30 - 1938/39
    SV farming states (QLD, NSW & WA) +21%
    NAV states (VIC, SA, TAS) -8%
    Post War years 1946/47 - 1958/59
    SV farming states (QLD, NSW & WA) +35%
    NAV states (VIC, SA, TAS) –1%
    (source – LVRG, 1963, p10)
  • Monash (last SV municipality in Victoria) is the most influential provider of household disposable income to residents in neighbouring communities (Prosperity for the Next Generation, City of Monash, 2001)
  • Land Values Research Group analyses show that
    • property bubbles widen the wealth gap
    • the loss to GDP of perverse revenue systems is enormous
      • the 27% of GDP that is publicly-generated resource rents is allowed to be privately expropriated by rent seekers
      • deadweight costs of taxation and land price bubbles to Australia’s GDP is $1 trillion each year


  • power of property sector over media and media knowledgebase
  • no easily-accessible data on national or state land values (and time lag when available)
  • cost of accessing local council rating valuations (ie $20 to access each 'section 32')
  • land tax needs major reform because of:
    • thresholds, exemptions, multiple rates, aggregation provisions, etc.
    • uncertainty due to small but noisy lobby groups pointing to aforementioned weakness to call not only for reduction in land tax, but abolition rather than reform
  • low level of land tax results in high speculation and thus higher land prices. Higher land prices lead to a higher nominal land tax charge, which in turn acts as a vehicle for vested interests to seek to have it abolished
  • only one SV municipality remains in Melbourne


  • Housing affordability at crisis levels with over 40,000 people on Victoria’s public housing waiting list alone.
  • Developers construction of new mini-suburbs devoid of services.
  • Governments caught in a policy quicksand – services needed but funding non-existent. If services are provided this makes surrounding property more unaffordable.
  • Council services provided are greatly stretched by urban sprawl


  • 100s of people employed by the property industry, particularly in media. This results in at least 5 press releases per week shooting down any and all forms of property taxes.
  • The resultant misinformation amongst the general public needs concerted effort to overcome.
  • Talented people within the planning industry (particularly Local Government) are constantly recruited into the fold of property developers. The stewardship of the public’s best interest within the bureaucracy is left in less skilfull hands.


Alfred Deakin said (first Prime Minister of Australia)

"The whole of the people have the right to the ownership of land and the right to share in the value of land itself, though not to share in the fruits of land which properly belong to the individuals by whose labour they are produced."


Land Rent in Australia

Leo Foley July, 2007


From its earliest days, Australia has understood the concept of all land belonging to the Crown.

When Australia was settled by the British in 1788, no recognition of prior ownership by indigenous people was recognized, and all of the land was claimed to belong to the Crown. Governor Phillip made grants to ex-convicts (emancipists), and later to free settlers and marines. Emancipists were granted 30 acres, plus 20 more if they were married. Free settlers and marines received 100 acres. Grants were dependent on the land being actually settled and used.

However, speculation arrived with the Second Fleet. Gov Phillip returned to England in 1792, and Major Grose, of the New South Wales Corps administered the colony. He made grants to his officers and allowed them to trade land. The NSW Corps became notorious for their monopoly control of the rum trade (the ‘rum corps’), but less well known is their exploitation of settlers to become great landed proprietors. Using monopoly trade practices and debt, they seized mortgaged properties and bought up land from disinterested grantees.

Colonial officials in London saw the dangers, but their attempts to place residential conditions were not enforced in the Colony. By 1828, 3 million acres had been granted, but less than 10% was cleared, and only a quarter of that cultivated. From 1821, grants to emancipists ceased, and larger sheep runs were handed to favoured free settlers, the size of the grants dependent on the number of convicts taken on.

Grants ceased in 1831, when land was sold without limit, by auction. The system was based on Wakefield’s theory that land should be sold at a price sufficient to produce a fund to pay the costs of bringing out emigrants (including many female) to work as labourers, but expensive enough to deter those emigrants from purchasing land. In Wakefield’s mind, everyone would be happy – the rich would hold all the land, and the poor would never lack employment. In theory.

But Australia is a big land. The land sales policy transformed Australia. As land was bought in huge tracts, poorer sheep owners moved to unsettled areas and ran their sheep over unlimited areas. The ‘Squatters’ were born. Naming them as trespassers had no effect, so a licence system was established. For the payment of a small fee, they could use the land they claimed, and in time they received official recognition as owners of the land they grabbed. A few hundred individuals controlled the land.

In Australia, water is scarce. Squatters were required to pay £1 an acre for the land they claimed. But by selectively purchasing land with access to water, huge areas could be controlled. In one case, 258000 acres were secured as a single sheep station by the purchase of seven hundred 40-acre blocks, with water access, in different parts of the property. Thousands of colonists and future settlers were shut out.

Various schemes to break up the large land holdings were attempted. ‘Selectors’ were entitled to select lands occupied by squatters, but the squatters used dummy selectors (even from asylums) to ensure they continued to control the land. By 1884, selectors had occupied over 23 million acres of Crown lands in NSW, but nearly all of it had passed into the hands of the squatters. Much of the money required to fund this scam was sourced from London. This led to a new phenomenon, the absentee landlord.

Squatters enjoyed the fruits of their land monopoly. Their riches were used to buy land in the growing cities, and the proceeds of land sales in the new colony of Port Phillip (Melbourne) was mostly transferred to Sydney. Squatters also gained political rights, enjoying multiple votes as property owners. The property franchise ensured they controlled the Legislative Council

Between 1861 and 1894, 50 million aces were alienated to large holdings. In the same period, there was a large increase in the urban population, as would-be farmers sought factory work.

Australia’s only rebellion, the Eureka Stockade, was a revolt against unfair miner’s licence fees, but less well known was their call to ‘unlock the land’. The Melbourne newspaper, ‘The Argus’, campaigned in 1854 for a land tax to unlock the land. So did the celebrated social activist, Caroline Chisholm. On calls for compensation to squatters, she said, “they should compensate the colony for the frightful and demoralizing effect of such a system as the one we now have working.”

In 1870, William Gresham campaigned in Melbourne through the Land Tenure Reform League. He called for alienated land to be repurchased, and the fee simple of the public domain to vest in perpetuity in the people. Occupancy should be subject to rental, allowing the revenue of the state to be derived solely from the rental of land. All indirect taxes would be abolished.

Australia’s first land tax was introduced in Victoria in 1877. Aimed at land holdings over 640 acres, it was another measure to break up the large estates.

By 1915, all States, the Commonwealth and New Zealand had introduced a land tax. Australia federated in 1901, and in 1910 a Federal land tax was introduced. (See below)

The Capital of Australia, Canberra, was settled on a leasehold system, with freehold in the Australian Capital Territory. (See Canberra in Crisis, F Brennan)

At local government level, rates are levied on land values only in NSW, Queensland, Northern Territory and ACT. The system is optional in Victoria, SA and WA, and is used by many municipalities. By 1970, 70% of municipalities, controlling 95% of Australia’s rateable land use, used unimproved land values for rating purposes. Tasmania is the only State where all Councils have always levied rates on improved values (house, plus land). In the 1990s, however, many Victorian municipalities changed from site value rating to improved values. The State Government controlled the process by creating financial disincentives to continue rating on unimproved values.


The Federal Land Tax

Until 1909, over 99% of the Federal revenue of £15.5 million was obtained from customs and excise, and the Postmaster-General. But those sources were inadequate for the Labor Party program of old-age and invalid pensions, an Australian Navy and large infrastructure developments. A fresh source of revenue was required, and it was decided to implement the then popular idea of Henry George of securing the rent of land for public purposes.


The Federal Land Tax Act was passed in 1910, levying one penny plus 1/30000th of a penny on the first pound of land value, after exempting the first £5000. It increased progressively by 1/30000th of a penny up to £75000, where the increment of tax was 6d in the £ (over £75000), and the average rate 3½d in the £.

As if the tax wasn’t complicated enough, various amendments increased the complexity. In 1914, the rate was increased o 1/18750th of a penny! In 1918, the rate was increased by 20%, but that was removed in 1922. In 1927, it was reduced by 10%, and during the depression it was reduced by a further 33.33% in 1932, and a further 50% in 1933. The lower rates remained in force until at least 1938.

In 1942, the Federal Government took over the Income Tax powers from the States. It has retained them ever since. Income tax became the main source of revenue for the Commonwealth, and Land Tax became less relevant. The Federal Government abolished the Federal Land Tax in 1953, leaving the field to the States. There is no legal reason why the Federal Government should not again collect a land tax, but there are no signs of any interest to do so. So called ‘reforms’ of the tax system have focused on consumption taxes and tweaking income taxes.


The Federal Land Tax (1910 – 1953)


  • Captured some of the value of land for the community
  • Ensured that land was recognized as a community resource.
  • Established Valuers General in all States;
  • Created an ability to calculate national land values.


  • Exemption of first £5000 value permitted fraud and evasion. Larger estates were subdivided between family members, each member securing the £5000 exemption.
  • The graduated rates of tax were unjust, making taxpayers face different levels of tax depending on their circumstances. This distinction was based on ‘class’.
  • Small parcels of land were not subject to tax, which tended to keep the price of all land high.
  • Did not enjoy bi-partisan support, so was marginalized and eventually scrapped.


  • The need for large infrastructure projects might create opportunities for the collection of rent from those who will benefit. However, as the principal beneficiaries are resource companies, it is not likely to be seen by the public as the collection of ‘land rent’.
  • Strategic alliances exist if we are prepared to work with groups who may have different agendas
  • Availability of land has become a central issue in the ‘affordable housing’ debate;
  • LVC could be implemented at a Federal level, and revenue redistributed to States as is done with the GST.


  • Land is now seen as a State issue. A strategic approach is required to lure the Federal Government back into the land tax field;
  • The ‘user-pays’ philosophy has overtaken the ‘unearned increment’ as the prominent idea in the popular mood;

Walter Burley Griffin (1876 - 1937), designer of Canberra, and member of Chicago Single Tax Club:


"Without being familiar with political affairs in Australia, I cannot refrain from extending congratulations to your Government on the stand it has taken to maintain for the Commonwealth in perpetuity the rental value of the capital site. Failure to do this everywhere is largely responsible for distortion and prevention of natural city growth, nowhere better exemplified than in our own capital, Washington, where speculative holdings perverted the development from a splendid start with far-seeing plan, and where the financial benefits of the nation's backing are now accruing to private individuals." (In a letter to the Minister of Home Affairs in September 1912)

Canberra’s Leasehold Land System

The Road to Leasehold

Section 125 of the Commonwealth of Australian Constitution Act provided for the seat of government to be within territory belonging to the Commonwealth. In 1901, the Parliament moved to secure an area of not less than 1000 square miles..., the ground only to be let on leases to utilisers..."


Later, Section 9 of the Seat of Government (Administration) Act 1910 provided:
"No Crown land in the Territory shall be disposed of for any estate of freehold".

Legislators of the time were determined that they "shall not play into the hands of the speculators". Instead, Edmund Barton, first Prime Minister of Australia, termed the arrangement as a matter of good business: "we shall lease it on fair terms and still make a profit for the Commonwealth". .

Ideology rode high. Austin Chapman sought a "brand of municipal socialism which would present to the world a spectacle not previously seen in; an entire city, and all connected with the city owned and managed for the people of Australia."

The development of Canberra was informed by the experience of Washington in the United States. Reference was made to the land in Pennsylvania Ave which, while locked up in private hands for 100 years, was said to have increased in value by hundreds of millions of dollars through the unearned increment.

Most Australians supported the development of a Territory for the seat of government. But no one was willing to pay for it. What better way to escape the dilemma than to establish an onus on the yet unknown residents of the as yet unselected Territory to meet the cost of developing the capital.

Some optimistic members of Parliament considered that the capital city would be a paying income from land rent would almost certainly overtake the expenditure.

By 1920, however, political parties had lost their zeal for land tenure reform. Parliament was uninterested, but for the lone voice of John Grant, who declared himself to be a disciple of Henry George.

The City Leases Ordinance 1921 empowered the Minister to grant leases of land within the city area for periods not exceeding 99 years. The basic provisions were:

  • an annual rent of 5% of the unimproved value of the land;
  • the value of the land to be reappraised after 20 years;
  • the construction of a building, in accordance with the lease, was to be commenced within one year and completed within two years of the granting of the lease.

John Grant moved to disallow the 20 year revaluations, saying that a five-year period between reappraisals was essential. This later proved to be an important point.


The first sale of leases was held in December, 1924. Residential land was sold at auction for £400 pounds, but the bid prices merely fixed the capital values, so all the purchaser paid at auction was the first year's land rent, which amounted to 5% of the capital value.

In 1925, the seeds of destruction for the leasehold system were sown. The Federal Capital Commission consented to leases being transferred without a building being erected on the leased land. Parliament after Parliament had previously insisted that land in the Territory should be made available to land users only. That restriction had been intended to keep land speculators away, but the door was opened allowing the land speculators to enter. It was the greatest of many mistakes made by the Commission.

By the end of 1929, 485 leases had been granted. Of this number, 186 had been surrendered. But around 130 had been transferred by speculators, a very large proportion of the existing leases.

Senator Elliott, a fierce critic of the land rent system, attempted to obtain a site for his legal practice. He was informed via the commission that there was no land for sale. Local agents, however, advised that there were a great number of sites which previous purchasers were willing to sell. He purchased leases for four blocks from two Sydney women, who had secured them just four months earlier for the first year's land rent of 20 pounds per block (80). He paid them 1100 pounds for the four blocks.

In 1928, the head of the Federal Capital Commission (Butters) informed the Parliamentary Public Accounts Committee that the residential blocks auctioned in 1924 were really “a substantial gift by the Commonwealth Government to the purchasers”.

The majority of Australians were either ignorant of this orgy of land speculation or indifferent. Canberra was seen as faraway and artificial, and people had grown indifferent to land and its administration.

The system was under pressure on other fronts too. Residents of Canberra found they could not buy into the property market in Melbourne or Sydney, because they had not benefited from the capital gain (the unearned increment). One witness claimed that the leasehold system "might not be a disadvantage if the whole of Australia were under leasehold, but the difference in tenure is against Canberra."

Another witness, commenting on purchasers who had paid more than the going rate for a lease claimed that "the Federal Capital Commission is virtually in the position of trustees for the people of Australia. As such it should take care of the assets committed to its care, but at the same time it should protect the beneficiaries from their own folly and not take advantage of their weakness."

The Commission critics of the time were attacking the whole concept of leasehold, calling for its abandonment. John Grant died in 1928, and the ideology of the founders was gone.

The absence of any published works elucidating basic principles of the Canberra leasehold system has always been notable. As the years passed, the land administrators knowledge or appreciation of historical origins and development of Canberra's leasehold system lessened.

Treasury, by the late 1950s, had little knowledge of the difference between freehold and leasehold, and was not interested in the difference, preferring to regard them both as being equal sources of revenue, without distinction.

The land critics of the 1950 -- 1970 period differed from the critics of the Federal Capital Commission period. The more modern-day ones were attacking the administration or operation of the system.

Dark clouds gathered over Australia's experiment. By 1970, the rosy dawn predicted by its sponsors began to look suspiciously like a sunset. The leasehold system of land tenure had not failed in itself but its operation was obstructed and destroyed by indifferent administration.

The Purpose Clause

In Canberra, the planner was given the power, through the 'Purpose Clause' of the lease, to control land use down to minute particulars. Such power and such arbitrariness were unnecessary. The purpose clause should merely have indicated the general purpose for which the leased land may be used, without being too particular.


If, for example, the planners arrange only one butcher, or one foodstore in a suburban shopping centre, it creates a monopoly affecting cost and quality of service. Abolishing competition is not town planning. It is more akin to a system of licensing of business.

Valuation problems

There is no land market in Canberra in the same sense as there is in a freehold area.

  • Supply: the Commonwealth is the landowner, controlling the number of block available for purchase, making them relatively scarce or plentiful. Prices rise if blocks are scarce.
  • Demand: the Commonwealth can also affect demand to some degree by transferring persons to and from the city. This was important in Canberra’s formative years.
  • It is anomalous that the authority who values the land is also the land owner and the receiver of rents. Valuation should be thoroughly independent of all other Commonwealth agencies and responsible to Parliament.

The Premium

Premium payments have been allowed to obtain land. It departs from the principle that no capital outlay is required to become the holder of a Canberra lease - just a year's rental.

20-year reappraisals

In early days, it was necessary to make the lease as attractive as possible by leaving the rent at a modest and unaltered level for a long period. 20 years was fixed. By 1970, the same justification no longer existed. Rents set in 1952 may have been reasonable, but by 1957 they were low, very cheap by 1962 and peppercorn in 1969.

Rates in Canberra

Each block received two separate valuations:

  • a valuation for land rent purposes, and
  • an annual valuation for rating purposes.

Public servants seconded to the capital paid not only their house rental, but land rent and rates as well. They were disgruntled.


In 1928, a Board of Review considered the question 'why were any rates at all imposed in Canberra?' That is, in a land rent system, why were rates necessary?

The justification for rates being levied in Canberra was found to be that since rates were payable in other parts of Australia, therefore they should also be paid in Canberra. No consideration was made of the payment of land rent

A misunderstanding of the concept of rates lies at the heart of the problem. Rates levied on the unimproved value of land are, in the words of the late Lord Goshen, rent charged in favour of the community. Essentially, they are no different from the land rent paid for a crown lease.

In a progressive community land values have a constant tendency to rise. If the rent is fixed for 20 years, annual rates increases could be regarded as a supplementary rent. However, this is not the concept of rates that is popularly held.

Rates are regarded as a payment for municipal services and they are justified on the ground that municipal services add value of the land. In Canberra, where the annual rental value of unimproved land should be entirely absorbed by rent, rates are an absurdity. It is impossible to separate Commonwealth and municipal expenses so there is no basis for the level of rates to be estimated.

Rates in Canberra should have been abolished and the land rent remain as the sole payment for all leased land.


The demise of the system

In 1965, the joint committee was informed that "the originators of the scheme never contended that the Commonwealth must show a profit from the venture..." That is how history can be changed. Not one word in the public records of Australia will be found to support that statement. In fact, it is the complete opposite of the original objectives of the policy of leasehold tenure.


Confused minds, departmental minds, freehold minds and small minds proved inadequate to implement the grand undertaking. It led to the demise of the system.


John Gorton's changes

Under pressure from lessees, in a by-election, The Prime Minister, John Gorton, put forward changes to the system that took effect from 1971.

  • the payment of land rent ceased;
  • the reappraisal of land values every 20 years for rental purposes ceased; and
  • the income lost in consequence was to be made up by increased rates.

The changes signaled the complete breakdown of the administration of Canberra's leasehold system. It was estimated that the government transferred $100 million in equity to lessees at that time, resulting in the loss of an important source of revenue.'



What of the future?

By 1970, there were 23,000 lessees in Canberra. But what of the next 23,000 lessees?


All land has a rental value and if the Commonwealth does not get this value, the lessees will. The rent will be capitalised into land prices. Hence, all Canberra leases sold at exactly the same price as freehold.

Lessees pay their rates which need not exist, and they pay for their homes, shops and offices against the ever rising barrier of high land costs. In short, instead of paying land rent to the Commonwealth, they pay interest to the mortgagee companies for the money to build.

Should the Commonwealth ever require to resume leased land for public purposes, it will have to buy back at enormous cost land which has been so lightly given away.

Every decade the land rent should be increasing substantially and in one lifetime if the leasehold system was properly administered and land rent collected in the manner suggested, Canberra could be one of the richest cities in the world. It would be unique in that it would have no municipal rates and far from being a drain on Commonwealth finances it could begin repaying to the Commonwealth the capital expenditure of past years. This was the vision of its founders.


Lessons for future reforms

"A river is at its purest closest to its source".
From the beginning, absolute principles should be laid down:

  • the lessee is entitled to the undisputed occupancy of the leased land and to its exclusive use during the currency of the lease;
  • the lessee is entitled to nothing more or nothing less;
  • in particular he is not entitled to increments in the value of the land accruing over the term of the lease.


A tremendous responsibility rested on parliamentary representatives to see that the interests of Australians and their children's interests were protected. They should have referred to Australia's formative years when the words “unearned increment” were basic to any discussion of leasehold tenure in the proposed Federal Territory. As King O'Malley said at the Federal convention held in Adelaide in 1897: "the unearned increment created by the expenditure of the people's money belongs to the people..." The experiment failed due to their lack of understanding.



Canberra (1921 –1971)


  • The impetus for the leasehold system was the idea that individuals should not gain personal benefit from community effort.
    • Land was recognized as belonging to the people.
    • A strong moral basis for convictions.
    • The ‘unearned increment’ was seen as belonging to the community.
    • At a time of social ideals, social equity was the prime goal.
    • Only users obtained leases
    • Capturing the value of land for the community was seen as ‘good business’ – by the Prime Minister, no less.
    • From the start, the founders prescribed leasehold tenure. 10 years later, a strong commitment still existed
  • Mixed with this ideal was a nation-building vision of Australia. Canberra was to be a prototype city for the 20th century, planned and designed for its people and as a symbol of the new nation of Australia.
  • Knowledge of USA history was current and persuasive.
  • Principles were enshrined in legislation (to some extent) eg 5% rent prescribed; building on the leased land was compulsory; reappraisals of the land was to be carried out.
  • Auctions went well and established the system


  • The public and administrators had a poor understanding of the principles;
  • Ideals and principles were overtaken by the cruel realities of war;
  • Decision-makers sought an immediate cash return; Ideals were lost.
  • Principles were weakened – eg transfer of a lease prior to any building construction
  • Canberra was remote; most Australians were disinterested in what happened there
  • Speculation was officially sanctioned; 40% of active leases were sold by speculators by 1929;
  • Land needed to be available as and when required. The Canberra City Authority needed to release land as it was required, because if land wasn’t sufficient to house the growing population, leases rose in price, and speculation became possible
  • Any system is vulnerable to populist policies.
  • Practical implementation was difficult; poor administration followed, including an over-zealous planning system
  • Valuation should be independent. Valuation should have been by a quite separate Government authority, responsible to the Parliament.
  • Predictably, 20-year valuations caused difficulty. Potential difficulties increase if valuations are not made frequently (we suggest annually), as assessments can consequently rise steeply in times of economic prosperity
  • People posted to Canberra saw themselves disadvantaged against other Australians, who kept the capital gain on their property in Melbourne or Sydney.
  • Georgists were too thin on the ground to resist the crumbling system.


  • Canberra showed that a leasehold system is possible, if administered properly
    • It was seen as a self-funding system.
    • High ideals offered a high chance of success.
    • It established a working model.
    • The major lesson is to have accurate annual assessments to enable full collection of rent.
  • Education is essential; never let any part of the system be introduced without full documentation and continuing education.
  • Residents need to see personal benefit for the system to endure
  • Land Tax was seen as a source of revenue to fund additional Government services
  • Mistakes in Canberra can guide and improve future efforts:
  • Clear principles must be laid down for all to understand
  • Land valuations should be completed annually, and the rent adjusted in line with the revised valuation.
  • Every person should be on an equal footing ie no premiums or exemptions
  • The system cannot work through a watered-down model.


  • People tend to see their own good before the ‘greater good’.
  • From its early days, pragmatism threatened the system.
  • Ideals gave way to ‘making it work’, somehow (but it didn’t, of course).
  • Ideals were discarded for the simpler argument of raising the required money.
  • The system was seen simply as a means of financing government programs.
  • Proponents were unrealistically optimistic in their expectations.
  • A proper understanding is necessary, to revive an ‘old’ but fundamental idea.
  • Long periods between appraisals cause large increases in rents.
  • Who should pay is always a crucial question.
  • Politicians are interested in the next issue. Keep them at it.
  • The system needs reinforcement (education).
  • Popular misconceptions should be challenged.
  • Issues must be kept relevant.

Clyde Cameron (Federal Minister for Labour in the 1972- 1975 Whitlam government):



Rent is not a tax! It is merely giving to the community a rental equivalent of the special advantage of being allowed to hold the exclusive possession of a piece of land which due to its location or productivity, gives its possessor an advantage others don't enjoy.



California, USA

The Wright Act, California, USA SWOT Analysis


In the second half of the 19th century, as the American state of California filled up with settlers after the Gold Rush, a few cattlemen owned massive amounts of land. Consequently, many farmers and miners lacked access to sufficient amounts of water flowing in rivers and streams. For instance, Henry Miller, a German immigrant who anglicized his name from Heinrich Mueller, owned about 1,000,000 acres of land. He could drive his herds of beef on the hoof from Mexico to the state of Oregon and spend every night on his own land.

In 1886 Miller won full rights to the water of the Kern River. Some people concerned with justice figured Miller had overstepped reasonable bounds and organized to take a stand for water and land rights. In particular, a rural schoolteacher, C. C. Wright, ran for a seat in the state Assembly just so he could advance a tax on land value. Back then in his time and place, the logic of charging owners for their holdings so that they would sell off their excess was well understood by a populace that had first hand experience with “latifundia” and with the arguments of Henry George circulating through political discussion.

Wright won his election, took his seat in the capitol in Sacramento, and in 1887 persuaded his fellow legislators to pass the Wright Act. After the governor signed the act into law, Wright retired from politics. His political achievement allowed communities to create, by popular vote, irrigation districts to build dams and canals and issue bonds which would be repaid by capturing the resultant rise in land value. The levy not only raised funds for the new infrastructure, it also prodded owners to release their excess land.

Once irrigated, land was too valuable to use for grazing. Others were willing to pay more to farm it since the market price for grain per acre was higher than the profit from beef per acre. As the value of the land rose, so did the tax upon it, making it too costly for owners to hoard the land for ranching. So cattlemen sold off fields to farmers and at prices the farmers could afford.

In ten years, the Central Valley was transformed into over 7,000 independent farms. The Wright Act became even more "Georgist" after several years of use when it was amended to mandate the total exemption of improvements from the tax base. Irrigation Districts included and taxed land that was not used for farming but for residence and commerce within townships. Steadily the Irrigation Districts evolved to do more than just deliver water. They also expanded to provide reclamation, recreation, and electric power at cheaper rates than private utilities. Over the next few decades the tree-less, semi-arid plains of the San Joaqin Valley became the "bread basket of America", one of the most productive areas on the planet.


In 1958, California's U.S. Senator William Knowland, a Republican, described the Wright Act as “more important to the growth of California than the discovery of gold. It taxes people into instead of out of business.”

One of the main strengths of the Wright Act – as an example of public collection of land rent – is not economic, despite its obvious economic success, but political. It demonstrated the power of one person to bring about a major advance in justice that benefited his entire society. One citizen became a leader who won office, won over his fellow legislators, and won the signature of the state’s governor.

Another political strength is that this approach to funding infrastructure appealed to all the major players. It was convincing to both a majority of voters, who had elected Wright as their representative, and it appealed to enough politicians, including the governor, to get the reform passed into law. The proposal to build infrastructure and to pay for it by recovering the resultant rise in land value was easy to explain and considered to be fair by nearly everyone.

The formation of local authorities to raise bonds to pay for irrigation made the Wright Act a highly decentralized method of public funding based on the “user pay” principle. Rather than burdening the general taxpayer with debt, the bonds were repaid by those willing to pay for access to land based on the higher productivity provided by the irrigation systems. This infrastructure was built entirely without need for state or federal aid.

The Wright Act demonstrated that land value capture can be a powerful instrument for effective, efficient, and fair land reform. Rather than mandating acreage limitations like other land reform approaches, this land value capture approach allocated land according to those who were willing and able to make appropriate use of land at its highest and best use once irrigated. The Wright Act was further strengthened when it was amended in 1917 to exempt improvements such as crops, orchards, vineyards, buildings and personal property, further strengthening incentives for agricultural production.

The Wright Act naturally and non-coercively but steadily nudged underutilized land owned by a handful of large landowners onto the market and into the hands of smaller producers who had the willingness, skills and capacities to farm the land intensively, thus greatly increasing the supply of food. Other approaches to agrarian land reform often lead to bloodshed or reduced output per acre and leave society divided into hostile camps.

Sociologists who researched the communities and towns in the Wright Act area of some five million acres found them to be significantly more diversified in their economic base and having more amenities and social benefits compared to those in nearby non-Wright Act territory of California.


The Wright Act was established to fund specific infrastructure and was not sufficiently understood as an approach to public finance that could be expanded to fund other public needs for education, transportation, and even public health. There was no enabling legislation in place that would have facilitated the establishment of land value capture in lieu of taxation of production as a basis for overall local public finance.

In the post-World War II era, rapid urban and rural growth again made water scarcity a top California priority. Local and state leaders, instead of turning to the Wright Act, persuaded the federal and state governments to give billions of tax payer funds for the Central Valley and Feather River irrigation projects. This approach has given American public works projects the bad name of “pork barrel” with politicians voting to please each other’s constituents. It taxes the many for the profit of a relative few, without the local attention and care induced when beneficiaries pick up the tab.

The hundred or so California irrigation districts still functioning (as of year 2000) suffer somewhat from their own success. Free water led to waste of this precious resource, so water tolls were added. As fees for electricity paid off debts and met revenue needs, land value rates were greatly reduced. Because land values continued to rise as living conditions in this region improved but were not captured back for public benefit, there was thus a return to some of the very conditions the districts originally remedied – absentee ownership, land speculation, and over-sized holdings.


Opportunities to expand upon this approach to financing infrastructure in California appear limited at this time. As the state progressed in complexity and centralization of tax powers, public finance moved rapidly from land based taxes to a mix of taxes on income, homes and other buildings. This eventually led to a “taxpayers revolt” in the form of legislation that many consider in hindsight was destructive. Proposition 13 was the state law which set limits on assessment increases, regardless of market values, and which set rate ceilings that forced greater reliance on non-property revenue sources.

California has struggled to meet budgetary needs for government services ever since. And high land prices drove up the price of housing to such a degree that many residents became vulnerable to subprime and adjustable rate mortgages which are now in foreclosure putting the dream of home ownership forever beyond the reach of millions of residents of this “rich” state.

Walter Rybeck, director of the Center for Public Dialogue and former assistant director of the National Commission on Urban Problems has analyzed the shift in tax policy in the United States away from the almost exclusive use of property taxes which, at first were predominantly taxes on land values to fund local and state government needs, to a federal government structure which grew to over-shadow the state-local sector, funding itself with taxes on production and income. He had this to say at the cusp of the millennium:

“Land value taxation in the United States is a story of the struggle to recall and apply overlooked lessons from the nation’s formative years to ease the mammoth socio-economic pathologies generated in large part by the detrimental tax policies of later eras.”


Those puzzled by the slow progress of land tax reforms should not overlook how big landlords, bankers, and private utilities fought mercilessly to undermine the Wright Act. When their votes failed to overturn it, they took their opposition all the way to the US Supreme Court where they called the act “communism and confiscation under guise of law.” The high court disagreed, holding that the act “does not deprive the landowners of any property without due process of law.”

Those opposed to the Wright Act did not give up. During the 1930s Depression, Californians who had made excessive loans on land in the districts were unable to meet their payments. Under the Wright Act the first lien on the land for non-payment of the district land taxes was held by the local governing authority. Mortgage bankers holding these loans urged Congress to pass arcane bankruptcy laws to rescue them in a way that erased their obligation to pay the district land taxes, which would have put the first lien on the land in the hands of the banks.

J. Rupert Mason, who documented these episodes, said “perhaps no other law in any State has been more often attacked in the courts.”

This SWOT analysis, compiled by Alanna Hartzok, draws heavily from the United States section, written by Walter Rybeck, of the book Land Value Taxation Around the World, an anthology compiled by Robert Andelson and available from the Robert Schalkenbach Foundation.

Since this SWOT analysis was compiled, this additional information was contributed December 23, 2011, by Dr. Mason Gaffney, University of California, Riverside:

As to the 1917 date, that came at the tail end of the movement to exempt capital from irrigation district taxes. Here are some notes from my research on the subject.

“1909, L.L. Dennett leads successful move to amend Wright-Bridgeford Act to let Districts, by local option, limit assessments to bare land values. This cracked the slow settlement problem that had helped bankrupt some earlier districts.
Like the original Wright Act, this was developmental Georgism, forged in the crucible of 1870s depression, applied in a time of prosperity. Again like the Wright Act it was "single-tax limited," applied locally, aiming at egalitarianism only within a narrow universe of landowners. Gains to the landless were not entirely incidental, however: they could vote in Irrigation District elections. Effect was to foster subdivision, and land sales at lower prices.

Newly formed districts had to exempt capital; older districts had the option, and they soon chose it. Local campaigns in Modesto and Turlock bring out motives, attitudes, role of single-tax ideology. (1917, all districts having chosen locally to exempt improvements, Legislature made it mandatory.)
Block of Turlock, Modesto, S. San Joaquin, and Oakdale Irrigation Districts, remarkable rate of settlement and development. Modesto case documented in B.F. Rhodes' dissn., "The Thirsty Land." “

The original Wright Act, 1887, did not exempt capital from the I.D. property taxes. The early districts were caught up in the boom of the 1887-93 era; some failed. The court challenge that you cite below, Fallbrook I.D. v. Bradley, 1896, was therefore in the midst of a serious depression, and it was against taxing capital as well as land. It was rendered by a conservative court, the same one that overthrew the Populist income tax law of 1894. Bradley really had no legal case, though, because all public land had been privatized subject to reserved governmental rights, including the right of taxation.

The Wright Act is memorable not for exempting capital, which it did not do, but rather for:

1) Extending the franchise to all resident voters. I.D.s in other states did not and do not have this feature. Neither do various kinds of water districts in California. These prevail on the west side of the Central Valley, where they cater to giant landowners, who run them because it is “One acre one vote”.

2) Enforced inclusion of land of unwilling landowners – unless they were numerous enough to vote down the I.D.

3) Letting I.D.’s issue bonds, bonds that were first liens on the lands in the I.D.

4) Letting I.D.s include cities and their resident voters

For a good rundown on the above see Albert Henley’s chapter in Art Becker’s book, “Land and Building Taxes”.

Henley was a lawyer who helped craft the modified I.D. that serves the Santa Clara Valley, including San Jose. It has its own enabling legislation and name, “The Santa Clara Valley Water Conservation District”. The only modification is that it taxes buildings inside the City of San Jose – but not outside. This, Al told me, was a political necessity to get votes. There were two notable results:

1) For several years the S.C. Valley was a bad case of urban sprawl: more development outside the central core than inside

2) The land tax over 20 years, applied valley-wide, promoted so much urbanization that it supplied the matrix for what is now Silicon Valley. The sprawl was contained by the geography of the narrow valley.

My kingdom for a battery of researcher and brilliant writers and scholars to publicize all this!

BTW, it wasn’t just “cattlemen” who owned vast swaths of land and underused it. It was the Southern Pacific Railroad. See Henry George’s pioneering map of the lands of the Southern Pacific in California, and of course his first book, “Our land and land policy”.


DENMARK - Analysis and SWOT

by Ole Lefmann

The author would like to thank Professor Peter Birch Sørensen, Copenhagen, for comments on an earlier draft. The viewpoints expressed below are those of the author.

The practice of Land-Value Taxation has deep roots in Danish history, possibly antedating the first historically known King Svend Forkbeard (985-1014). Often in history powerful men succeeded to withhold the rent of land they should collect on behalf of the King; in fact most unrests and hostilities through history were over capture of the rent of land, which wording means the result of production when rewards have been paid to manpower for labour and to investors for investments.

Many times through history when the economy of the society needed restoration, rulers took to one or another type of LVT that mended the mess.

Progress and defeat. Modern Land Value Taxation began its progress in Denmark in the 1880’s and went on until in 1960 it began to decline because of a fatal failure during its implementation.

When it was introduced in Denmark in the middle of the 1880’s many Danes found it being a revitalization of the Old Danish tax on yield-ability of land (nature); and it did not take long before politicians seriously discussed the practicality of the idea.

In 1905 was established the political party The Radical Liberals who proposed Land Value Taxation instead of taxes on labour and consumption. Though this party in the beginning had only few seats in the parliament a widespread sympathy among politicians of other parties enabled it to gather sufficient support to have some legislation in favour of Land Value Taxation passed through Parliament.

However, this did not satisfy impatient Land Value Taxers who now entered a coalition with other radical idealists and named it The Justice Coalition. In 1919 this organisation transformed to the political party called The Danish Justice Coalition, in English tongue usually called The Danish Justice Party.

With one Land Value Taxation party already in the Parliament, a second wooing to the electorate and several supporters in the seats of the traditional political parties Land Value Taxation legislation speeded up. Various kinds of Land Value Taxation were introduced at the three governmental levels - municipalities, counties, and the State. They were all far from the ideal LVT-system - but the idea was seriously discussed and gradually progress was made.

After World War II, in 1948, the Danish Minister of Finance appointed a commission whose members should scrutinize the possibilities and consequences of introduction of Full Ground Duty (Land Value Taxation levied to the full on market prices of all land in Denmark). That commission published its report in 1954 in which the majority recommended a tax of 4% on publicly assessed marked prices of all land in Denmark.

In 1957 the three political parties: the biggest the Social Democracy and the two smaller: the Radical Liberals and the Danish Justice Coalition Party got enough votes to construct the so called Ground Duty Government; called so because at its inauguration it declared that it would collect as much rent of land as would be politically possible.

This declaration and the facts that many Politicians and Civic Servants were convinced of the virtues and advantages of Land Value Taxation; that pilot projects and tests had been carried through (after 1915); that 45 years negotiations had taken place about how to phase out old taxes, about the preferable proportion between tax on land values and tax on improvements including buildings, and about the preferable relations between various levels of governments; that a ministerial Sub Committee appointed 1948 had scrutinized possibilities and consequences of a general and full governmental collection of the annual rent of all land in Denmark and recommended LVT to the State in its report in 1954, convinced building entrepreneurs and other developers that high land-value taxations would now become the reality, which made it interesting for them to shift their passive investments in land on to productive investments.

During the Ground Duty Government (1957-1960) Industrial production went up - it more than doubled; private investments were three times bigger than public investment; employees and entrepreneurs earned higher real income than ever before; inflation disappeared almost; savings soared immensely; unemployment almost disappeared to around 1 percent; foreign dept was reduced considerably; domestic and foreign trade expanded, and at the end of the period (1960) all economic forecasters expected further economic progress and prosperity.

How much of the progress was due to the formation and activities of the Ground Duty Government is difficult to estimate exactly, as other countries experienced economic progress in the same period; but in Denmark the progress was eminent.

Nevertheless, in 1960 when the mandate to the Ground Duty Government should be renewed all the three government parties lost seats, but The Danish Justice Coalition Party lost all theirs. After the election the Social Democratic Party was still able to take power together with the Radical Liberals, but none of them promoted Land Value Taxation to the State any longer. The new government expected land value speculation to increase because of the overall economic optimism, and LVT would have been the rights means, but instead of that the new Government took to other but less effective means.

After the defeat of the Ground Duty Government no influential or career-seeking Danish politicians spoke in public in favour of LVT. That was the first step down stairs from the political practice of using Land Value Taxation. Degradation of the practice of using LVT for public revenue h6ad begun and it accelerated during the coming decades; the biggest blow was the abolition of the Incremental LVT (TIL) in 1965, as described below.

Economic analysts could all say that the defeat of the Ground Duty Government and the wiping out of the Justice Coalition Party was not the result of bad economic administration, and that during the period of the Ground Duty Government, 1957 - 1960, Denmark enjoyed prosperity better than ever as described above

See also the paper written by Dr. Louis Wasserman, 1962:

The reason for the defeat of the Ground Duty Government and its LVT policy in 1960 was not a failure in the assessment of the market prices of land, which functioned very well and was praised by professional assessors in many countries around the world; nor was there a failure in the collection of the LVT; neither was it because of bad effects on the national economics, which during the Ground Duty Government was at a stage as good as ever before as described above.

Economic analysts who examined the defeat of the Ground Duty Government have all emphasized that the reason for the defeat was political and succeeded because Danish proponents of Land Value Taxation had not enlightened people in general well enough about the advantages of their proposal.

The failure was a naïve underestimation of the facts that 1) only few Danes knew what LVT was all about, most people did not know the good effects they already enjoyed because of LVT and that the possibilities of citizens in general would improve further when more LVT would be levied; people in general did not understand that the revenue of LVT belonged to them all in common. The other underestimation concerned 2) the extremely powerful opposing powers dominating the public media - electronic and printed, which imposed on people in general the understanding that LVT was a tax like all other taxes, that it would be unjust if only landowners should pay all taxes, etc. Further they emphasized that poor citizens having no income or only small income would not take advantage of reduction of income taxes, which was crucial because many LVT proponents promised reduced income tax when LVT was publicly collected.

The failure not to make people in general understand that the Values of Nature and Society belong to all citizens and should benefit them all on an equal footing made the electorate vulnerable to propaganda imposed by the wealthy opponents who were strongly committed to crush the attack on their privileges to enjoy the advantages of nature and society. The propaganda led to the result that the democratic election dismissed politicians who spoke for LVT. No influential or career-seeking Danish politicians have spoken publicly in favour of LVT ever since; but in the first decade of the 21st century it seems that political interest for looking at values of privileges as a source for public revenue has begun sprouting again.

Danish politicians still practice land value taxation but only to local governments and only at a diminutive level amounting to approximately 1½ percent of all collected taxes in Denmark. This is because the prevailing attitude is that taxes should be levied from as many different sources as possible. The notion that all people have equal rights to the unearned income of privileges such as landownership is still suppressed by holders of privileges who want to keep this income for themselves.

Incremental LVT to the State. In July 1960 the Parliament had passed legislation that revised and increased the ‘Incremental Land-value Taxation’ to the State Government; a tax that after some years would have made it possible to abolish an annually growing part of other taxes without reduction of public welfare programmes or to distribute annually to all Danes an annually growing Equal Citizens Bonus.

Tax to the State on Incremental Land-values (TIL) had been in use in Denmark since 1933. In July 1960 it was revised and updated; but in 1965 this the most promising (promising because it would not burden production like other taxes) Tax to the State was abolished. The TIL of 1960 had some practical weaknesses, which should have been changed, of course, but the opinion wanted it abolished altogether.

See the English Summary of Professor Gunnar Thorlund Jepsen’s book in Danish: From Tax on Incremental Land Values to Tax on Release, 1970.

LVT to local administration. When in 1965 this much promising tax to the State had been abolished Local Boroughs were given the rights to collect for local administration as much Land Value Taxation as they found appropriate. The boroughs around the country used this right differently; for some years the highest rate of LVT to local administration was 9% of updated and rather accurately assessed market prices of land of which 7% was to the Borough and 2% to the County.

In the borough of Brøndbyerne near to Copenhagen the annual rate of LVT varied; the peak was for some years 6.7 percent of realistically assessed market prices of which 4.7 percent was for the Borough covering 50% of the borough’s expenses, and 2 percent was for the County. With these rates the borough of Brøndbyerne was for a couple of years leading by collecting the highest rate of LVT in Denmark; but then the leading position was taken over by the neighbouring borough Albertslund collecting 9 percent, of which 7 percent were for the borough and 2 percent for the county.

The high LVT rates enabled the Boroughs to improve their infrastructure (roads, public utilities, schools, swimming halls, libraries, sports facilities, etc) in the fast developing boroughs close to Copenhagen; and to keep income taxes low.

See below a copy of a brochure (in Danish) published by the Social Democratic Party in Brøndbyerne 1968 with pictures showing - for residents living at different values of land (in Danish: Grundvurdering) - the citizens’ annual advantages of the Social Democrats’ proposal of high LVT (47 promille = 47 per thousands of values of land) and low income tax (10.5% of income), instead of the Conservatives’ proposal of high income tax (14%) and low LVT.

Be aware that residents living in a tower block would benefit most of all (Danish Crowns (kr.) 1,036 annually) enough for buying a fridge every year. Also notice that the market prices of land were not supposed to decline, because the total of tax expenses (LVT + income tax) did not rise.

The right for the local administrations in Denmark to decide the size of local Land Value Taxation as high as they would find appropriate was cancelled in the late 1970’s. Local administrations are still using LVT, but only at very small amounts making no more than 1½ percent of all collected taxes in Denmark.

The ruling tax philosophy since then has erroneously been and still is that LVT is a tax like other taxes; and as such LVT is used - not as the alternative to other taxes that burden production, which LVT does not - but as one of as many tax sources as possible.


Grundvurdering = Assessed Ground Value
Skattepligtig indkomst = Taxable Income
Det konservative forslag = The Conservatives’ Proposal
Socialdemokratiets forslag = The Social Democrats’ Proposal
Grundskyld = Ground Duty = Land Value Tax
Personskat = Personal Income Tax
Næste års skattefradrag = Next year’s reduction of paid LVT
47 promille = 47 per thousand


S W O T - Review of Experiences of the Danish approach to Land Value Taxation 1880-1960:


The LVT-legislations in Denmark 1910 - 1950 only implemented pilot projects and various tests of possibilities of Land Value Taxation. Though these initiatives did not provide the great advantages that will sprout from the full LVT program, it is possible to point to some advantages provided by the Danish LVT:


LVT accords old tradition. In most human societies the idea of Land Value Taxation accords old traditional understanding that: Nature belongs to everybody; and the advantages of Society - created by the synergy of the citizens’ activities and by public administration - also belong to all citizens. Public collection of full LVT will end few people’s appropriation of publicly created values and the value of nature.

LVT avoids burdens on production. Every amount collected via LVT saves the same amount from being collected from sources where it burdens production, which all taxes do except LVT.

LVT prevents Urban Sprawl. Even small amounts collected as land value taxation prevent urban sprawl that ruins economics and social life in great parts of cities where LVT is not practised. Urban sprawl is practically unknown in Denmark. [Urban Sprawl - socially and economically “dead or dying areas” - is pestering most of bigger cities in industrial countries wasting productive possibilities and prolonging distances between living parts of the cities meaning longer transport, daily loss of time and money on commuting and unnecessary use of fuel. And remember that like cultures of bacteria unpleasant Urban Sprawl spreads to its surroundings].

LVT improves local infrastructure. The high LVT rates that Danish local governments were allowed to collect enabled the Boroughs to improve their infrastructure (roads, public utilities, schools, swimming halls, libraries, sports facilities, etc and to keep income taxes low). Fast developing boroughs close to Copenhagen took advantage of this possibility; see the above copied brochure published 1968 and distributed by the Council of Brøndbyerne to their citizens showing the advantages of high LVT and low income tax - instead of high income tax and low LVT.

LVT finances public needs. The tax on incremental land-values implemented in 1933 seemed to be the preferred type of LVT, an updated form of which politicians in 1960 presented to the legislators who passed it through Parliament. Hadn’t it been abolished in 1965 it would have captured for the public purse substantial parts of any rise of land values after 1960; it could have develop the capacity to finance any need for public revenue without reduction of the Danish welfare system; and probably other taxes would gradually have been abolished because they are more costly to operate than TIL and/or have a much higher risk of tax evasion than TIL has. All implementation of new and better infrastructure would raise the land-values and the revenue of the TIL, and abolition of expensive and evasion-risky taxes would also raise the land-values and the revenue of TIL.

LVT is easy to estimate and cheap to collect. Though opponents like to discuss many questions around LVT, which will postpone the implementation of the reform (Some of the most usual queries are discussed below under Threats) it is a strength that Land Value Taxation is easy and cheap to estimate and to collect. What the system is meant to capture for the public purse and use for the benefit of all citizens is based simply on the highest amount of money that somebody is willing to pay for the right to exclusive use of natural resources. The market will reveal the size of that, and assessment of it is not a problem for people who are used to assessing land properties in their daily jobs, such as Estate Agents, Builders, Entrepreneurs, Insurance assessors, Valuers, Appraisers, Surveyors, Mortgage lenders, Developers, etc., and Officers of the Inland Revenue Department for Taxation of Real Property may consult / cooperate with such specialists.

LVT tested in Denmark through generations provides experiences for other countries!



The Danish experiences have not revealed any weakness in LVT as a tax-system, but the chosen way of implementation proved to have serious political weaknesses and the law on Tax on Incremental Land-values (TIL) of 1960 had adopted too many allowances and complicated methods of calculation.


LVT appeared as a tax like other taxes is no good. Danish LVT legislation before 1960 was experimental pilot projects and tests, only collecting small amounts by Land Value Taxation, which did not have the capacity to provide Genuine Democracy based on all citizens’ equal economic rights to the values of Nature and Society, which in Denmark was the main purpose of the reform. Tests and pilot projects were of course fine, but opponents used the inferior effects of it to make citizens believe that there is nothing special about LVT and that it is a tax like other taxes.

To avoid this misunderstanding, proponents of LVT must convince the citizens of the Good Effects expected to sprout from further implementation of the LVT programme. In a democracy well informed citizens are important because they being the electors are the persons who decide whether the reform shall go on or not.

LVT law with many allowances ran into a disaster. The Danish TIL (Tax on Incremental Land-values) that passed through the Danish Parliament 1960, was based on 27 years’ negotiations between different groups of interests and had got too many exceptions and allowances that caused complicated methods of calculation, which people in general - keenly supported by wealthy and influential opponents - found silly, unreasonable and/or even unjust. These awkward rules should of cause have been corrected; but the opinion was for abolition of the total scheme.

Professor Gunnar Thorlund Jepsen described these fatale problems with the Danish TIL in his book in Danish From Tax on Incremental Land Values to Tax on Release, 1970. Its English summary is embedded above.



The economic capacity of any modern society is great. Cooperation between differently specialized manpower presents a gigantic economic power. Free exchange of experiences, skill, techniques and goods mediates astonishing results. Free competition between inventors and producers speeds up the processes.


General people’s trust in money facilitates distribution. Today production of wealth and services performs a cornucopia; nothing seems impossible. Yet, human beings face serious problems because public power supports the practice to allow some citizens to take out growing parts of the results of the production of the nation without giving goods or services to the producers in return.

LVT is able to provide Equal Rights and Social Harmony that will come true when public power supports public capture of the rental values of all common properties (nature and advantages provided by public administration or by the synergy of the citizens’ interactions), so that everyone enjoying or using common properties pays the market-determined fee to the government who then uses the revenue to the betterment of all citizens.

The betterment of all citizens means either public provision and maintenance of needed infrastructure and catastrophe preparedness and public services or public distribution of equal shares to all citizens (Equal Citizens’ Bonus will make the citizens understand that the rent of privileges belongs to them), or both.

LVT is able to support Democracy

Democracy means governmental power to the electorate whose members have Equal Rights to express their points of view and distribute them, have Equal Rights to stand for a seat in Parliament, and have Equal Rights to vote for representatives to Parliament and for referendums. Today’s Democracy should be able to guarantee all citizens Equal Rights to the value of the Advantages of Nature and Society, which is possible by implementing full LVT, that will make Democracy work perfectly.

However, today’s’ democracies have been retained in their developments because of:



This reform challenges vested private interests that until today have been and still are able to collect and withhold the excess profit of holding land and other privileges and use it for their own satisfaction; and the privilege holders use their strengths and influences to impress a strong opposition against a change.


They have the necessary economy and they control the public and private information media, printed and electronic; they use these means to make universities, professors, journalists, politicians and other key persons dependent on them and make them understand which attitudes they should prefer and which they should suppress.

Of course privilege holders want suppression of all attitudes that aim for destruction of their privileges and of attitudes that spread or support information about their unjust capture of values that ethically belong to all human beings on an equal footing. They also want to further ideas that present alternatives to true information about their traditional anti-social attitudes and behaviour.

When privilege holders see that LVT is about to be implemented they try to postpone the process, try to spread confusion between the electorate and provoke them to vote NO. They turn the discussion away from their alleged exclusive “rights” to enjoy the advantages of nature and society; and instead they want to discuss other matters, such as mentioned below:

Mistrust to public administration. Privilege holders - who enjoy public protection of their privileges - are interested in a public opinion that asserts that public administration is ineffective; they will build up the opinion that administration everywhere is much better executed by private managers. But there is absolutely no guarantee that that is the case. It is right that monopolies imply the risk of becoming corrupt, rigid and ineffective but that is the case whatever the monopoly in question is executed by the public or by private.

People in general should be aware of the risk of corruption; wherever they meet it they should report it to impartial institutions, maybe to the independent press, or to a reliable ombudsman institution, and use their democratic rights to replace ineffective administration with effective management and administration, etc.

Democracy and equal rights have to be fought for every day.

Mistrust between Socialists and Liberalists. Opponents against LVT may take advantage of proponents’ different attitudes to the question of use of the revenue. The great idea is that the revenue of LVT shall be used for the betterment of all citizens on an equal footing; but that may be done in different ways such as:

  1. Public supply and maintenance of infrastructure and public services. Some call this way the socialistic way.
  2. Public distribution of the revenue in equal shares to all citizens who will decide how, when and by whom their wishes shall be met. Some call this the libertarian way.

The difference between these attitudes has the capacity to fuel long discussions during which energy and resources are wasted and the implementation of the most important part of the reform: end of few citizens’ taking of public properties is postponed. Privilege holders and their supporters will keep these discussions going on as long as possible.


As a compromise between above the above proposed 1) and 2) is to divide the revenue in two parts; e.g. two halves, one for urgent public needs and the other for equal distribution to all citizens having citizenship to the country in question. Equal distribution makes the citizens - alias the electorate - understand that the rent of land is theirs, belonging to all citizens on an equal footing, which should make them react against somebody who might try to capture greater parts of the rent of land for their private interest.

Claim on compensation. Time, energy and resources may also be wasted on discussions about compensation to landowners for loss of the rental value of their privileges. However, claims on compensation should not postpone implementation of LVT, because

  • - The implementation of All citizens’ equal rights to the rent of land cannot be implemented over night; it will be implemented gradually over some years, during which time the reform will aggregate increased values to all citizens so that in all probabilities nobody will suffer loss of value for which to claim compensation. - Exclusive rights cannot exist without protection by the society’s supreme power; meaning that values of exclusive rights factually are made and maintained by the government on behalf of all citizens and therefore belong to all citizens in common. - It is just right to collect publicly created rent of land instead of taxes on production. - Compensation for termination of injustice would just prolong the injustice. - There is no tradition for compensation for revenues publicly collected for public reforms or new tasks. - Landowners may say that it is unjust to collect the revenue needed for public administration and public services from only landowners; but the situation is that if landowners are also producers they may keep untaxed income of their production in the same way as all other producers. Landvalues are not for individual landowners but for all citizens in common.

Pedantry. Also it is a threat that some politicians and economists incline to go into pedantry (often instructed by privilege holders who want to continue keeping the rent of land for themselves). It appears from the above mentioned Danish book by Professor Gunnar Thorlund Jepsen and from its English Summary that for decades Danish Politicians, Economists and Civic Servants discussed carefully all aspects of Land Value Taxation. Too carefully in fact as it seems that the more the discussions focused on details the more complicated became the calculations of the tax, the more were raised demands for exceptions from LVT, and at the same time grew the risk of making mistakes.


Corruption. As is the case everywhere monopolies exist and power is concentrated we have to face the risk of corruption in assessment and collection of the LVT to be paid to the public purse by individual users of the advantages of nature and society. There is no risk of corruption in equal distribution to all citizens.

Assessments of LVT have to be publicly displayed and everyone should be able to protest against too high or too low assessment of certain sites of land; further, people in general should be aware of the risk of corruption, should report to impartial institutions, an independent press, an ombudsman institution, etc.

LVT proponents had difficulties in being heard and seen. The fact that public media - printed and electronic - was controlled by opponents against LVT had a catastrophic effect on formation of the public opinion about the implemented LVT in Denmark in 1960. It will also present a disastrous threat to LVT implementations in other countries if all media of information is controlled by wealthy tycoons whose interest is to keep the electorate in ignorance of the good effects of full Land Value Taxation including its capacity to end private capture of the value of nature and of advantages of the society.

People in general have to be well informed of the fact that the Values of Nature and Society belongs to all citizens who shall benefit from it equally. They do not have to put up with private capturers’ violently preventing them from their natural heritage.




The proponents of LVT must make the citizens understand that Good Effects will sprout from further implementation of the LVT programme. (Equal distribution of shares of the revenue, might be the way to make them understand it).

Only if the citizens feel deep in their hearts that the values of Nature and Society belong to them - and not to few privilege holders only - will they refuse the intense propaganda imposed to them by wealthy privilege holders and their supporters who want to continue capturing free lunches of privilege profits for themselves.

If people in general do not understand this the democracy will go on protecting economic injustice.

5 August 2007, Ole Lefmann


Hong Kong

by Jeffrey Smith

Note recent article at end of this SWOT.


People who point to the "Four Tigers" of Asia as examples of developmental success tend to give credit to state planning and state partnership with big business. While it is true that those governments did invest in big business, other nations have done so with fewer positive results.

Common to all the East Asian success stories was land reform. Their land reform was not the type which takes land from some and gives it to others. Instead, those Pacific Rim governments captured land rent. Most of the Asian Tigers used taxes on land but one used a lease for land; that was Hong Kong.

In the middle of the nineteenth century, the British Empire demanded the land for Hong Kong – about eleven hundred square kilometers – from a weak Chinese central government. The British rulers wanted to keep strict control over land that was still in many ways a part of a foreign nation and so decided not to sell any of the land but instead to lease sites for 75 years. Too few people wanted to lease “Crown land” for that length of time so the Governor extended the term to nearly a century. That lasted for a number of years until London returned the term to 75 years and then, yielding to protests, agreed to end their rule when a century was up.

Since all the land in Hong Kong was public, owned by the government, and none was private, owned by individuals, there was no private property for government to tax, only public property for government to lease. To raise revenue from land, the Crown authorities had to get the best deal they could in leasing public land by auction or negotiation.

The terms of the lease not only determined how much rent the leasor would pay the Crown but also other conditions such as requirements of the building code. By the terms of the lease, the Hong Kong authorities did not get all the available land rent, but they did recover a healthy portion, roughly 40% (Yu-Hung Hong, Landlines, 1999 March, Lincoln Instute., Cambridge, MA). And since speculators could not buy land and avoid taxes, there was no withholding of land from use, waiting for values and prices to rise in the future.

Of course, some people did speculate that a certain location would rise in value and bought it hoping such would eventuate, but they had to put the land to use, they could not keep it vacant for long. People leased land in order to develop it as soon as possible to pay their lease rentals and profit from filling the new buildings with tenants.

Since the Hong Kong Crown government lived off of rent from land, they did not impose many or heavy taxes on people’s productive activities. Given numerous loopholes and exemptions, about half the populace did not pay any income tax and lived in low-cost public housing. Cutting individual taxes and housing costs reduces the two main drains on the budget of the average household in almost any society.

Hong Kong was more active in trade than were the natural ports on the Chinese coast. For three decades in the second half of the 20th century (the 1960s, 70s, 80s), Hong Kong’s economic growth averaged over six percent per year in real terms (after accounting for inflation).

Fortune magazine often ranked Hong Kong as one of the world’s best places for business and once ranked it as the very best place for business in the entire world (1991). Generally sympathetic to business interests, in 2008 the international libertarian movement also ranked Hong Kong as one of the freest jurisdictions on the planet, and sometimes the absolute freest. (Second place is Singapore, another land value capture jurisdiction.) Neither ranking agency – neither Fortune nor the “libertarian” Heritage Foundation – noted that the main underlying factor contributing to Hong Kong’s success was the public recovery of land rent.

Thanks to public recovery of site rent, other taxes were low, prices were low, investment high and wages high. Per capita income was among the highest in the world. In the markets consumers could find goods in remarkable diversity. Whatever was offered anywhere was available in Hong Kong.

Since leasees do not pay rent in order to hold land out of use, the coastal island that makes up Hong Kong is used so efficiently that despite 6.6 millions of people living there as of 1998, they still have enough room to grow much of their own food. However, lately they have been turning open land into courses to meet the more profitable golf craze.

Because they use land efficiently and recover such a high proportion of rent Hong Kong can afford one of the best mass transit systems in the world. Unlike most every other subway-and-bus systems in the world, it operates without one penny of subsidy from the government’s general fund; the metro subway supplements its fare box income with rent from sites near its subway stops.

Pre-unification, Hong Kong recovered 40% of its rent and used it to fund 80% of its budget (Yu-Hung Hong, Landlines, 1999 March, Lincoln Inst., Cambridge, MA). If it had recovered all its ground rent, it could have forgone other taxes completely and even paid its residents a dividend. Since unification, the new partially communist government has brought in new taxes and precise figures on public rent-recovery are not available.

However, Hong Kong still has a surplus in its public treasury. Hong Kong’s English language newspaper, The Standard (January 7, 2008 “Budget boost for welfare reviews”) reported that the government of Hong Kong’s surplus is set to break the HK$100 billion mark when the current fiscal year ends. The government announced a 2.8%, or HK$419 million, increase in welfare and handicap allowances starting from February, 2008. But persistently surging inflation has forced it to consider making payments more frequently.


From a government’s point-of-view, Hong Kong is an exceedingly powerful example of just how much rent is available. Whereas one can turn to official sources to find out other economic answers – such as how much average wages, unemployment, inflation, productivity, GDP, private debt, public debt, private investment, international aid, etc – it is odd that one can not turn to official sources and find out how much rent flows in an economy, how much do people spend on the land that they use. Since such information is not readily available, it is quite instructive to look at a place like Hong Kong where government does recover rent and manages to live off it.

Another strength is how recovery of rent did make possible the diminishment of other taxes. Taxes are like kryptonite to many hardworking business people, anathema to risk-taking investors; they try to avoid them at all costs. Hence their love for Hong Kong where taxes are low. Physically, Hong Kong is barely more than a bit of island with no natural resources in competition with other major ports along the Chinese coast yet it prospered more than any of them. It must be comforting, from a business perspective, to know that if investors forgo returns from locations, they can still do very well and profit from investments in buildings and in other enterprises, an argument that proponents could make to enlist the support of the business community.

Such a public policy context did not benefit just businesses but also the average resident. Almost everyone in Hong Kong could find work and fashion a life of comfort and prosperity. Likewise, it should comfort workers and homeowners to know that having to pay in rent – rather than keep it as part of the value of one’s home – does not constitute a loss but instead means higher wages and lower prices coupled with a wide variety of goods in the local marketplace.

Another strength is the appeal that rent-recovery should have to environmentalists. By leasing land, rather than selling it forever, Hong Kong fostered efficient land use, which spares non-urban land; the more intensely people use land in and around cities, the less they need to disturb land out in the countryside at all. Also, given world-class mass transit, residents of Hong Kong did not have to rely so heavily on the automobile, a technology which is enormously destructive of the planet.

Another strength, from a democratic point of view, is how funding public benefits from land rent while placing few and low taxes on workers and productive capital fostered an appreciation for freedom so that when reunification came in 1997 on July first, the residents of Hong Kong were able to negotiate some degree of autonomy from Beijing. Further, both that political compromise and the recovery of land rent for social needs could serve as models for the rest of China.


The main weakness of the Hong Kong example of rent-recovery is that it was not organic. It came about because the conquerors decided not to sell land but lease it and for as much rent as they could get. Hence government, foreigners in a foreign land, did the right thing for the wrong reasons.

As Hong Kong grew and buildings were built, the government did not bother to separate the value of the improvement from the site. Thereby, government took a portion of the value of both the land and the building. When owners are charged a fee or tax for constructing quality buildings, that charge acts like a penalty; the owners must calculate that cost in their budget and so have less money to spend on quality construction and on quality maintenance. Hence that unnecessary tax lowers the quality of buildings to some degree. In a culture like Hong Kong’s where the work ethic is strong – due to low taxes compared to most places – the loss in quality of buildings is not as severe as it is in another society where the work ethic is weaker and taxes are more fervently resented.

Another weakness is that Hong Kong did not recover all its ground rent so just like every other community where locations grow more valuable, the more grasping did all they could to direct rent into their own pockets. They tried to turn land into private property in perpetuity; they tried to lower the terms of the leases; they tried to raise other taxes. One speculates that if residents were to receive rent via a dividend paid by the government, perhaps then they would not turn to or allow others to turn to privatizing rent via other means.

Another weakness of the Hong Kong experience is that the local government was not fully autonomous and had to follow some orders from the central government. After “the changing of the guard”, the new regime sought and implemented other taxes of the counterproductive variety. That tax shift – away from rents, toward real enterprise – cost Hong Kong its high ranking in various lists.

The shift of taxes from rent to a more conventional system in part explains the rise in inflation in Hong Kong. When government fails to recover rent, that lets owners and buyers bid up the price of land. That lets owners borrow more against the value of their land and forces buyers to borrow more. Since most governments print new money to meet the need of lenders, the more debt in society, the more inflation in its economy. Neither debt nor inflation is healthy for workers and consumers, as they make economies top heavy and lead to recession.

Another weakness was that the people of Hong Kong did not know how good they had it or what provided the basis for their prosperity. Unlike the US government which tries to export its brand of democracy and capitalism, the government of Hong Kong did not try to educate anyone – abroad or its own populace – about the benefits of a public revenue system that recovers rent while cutting taxes on effort. The likely reason why government authorities did not proselytize is that even they did not understand how different and how beneficial was the system that was “just by accident” handed to them. It takes a special kind of curiosity to seek out such connections and a unique type of personality to want to pass on the information.


Hong Kong has before it an important opportunity to further its land value capture policy since the city’s land is already in the public domain. All the public authorities need to do is to strengthen the terms of the land leases, which politically should be far simpler than raising taxes on private land.

And since Hong Kong enjoys a public revenue surplus it should be able to institute citizens’ dividend payments which could win over a majority of the populace to this policy of capturing land rent while forgoing taxes on useful effort.

Hong Kong also offers the opportunity to study and compare economic indices before and after reunification in order to show how the shift of taxes from rent to effort backfired and somewhat hobbled the Hong Kong economy.

Hong Kong might also prove to be an entry to the thinking of the rest of China as to how to address both the problem of rapidly escalating land prices and the growing wealth divide. Given that Hong Kong worked so well and much better before the communists came to power and meddled with the city’s tax system, perhaps they will learn from their experience. Instead of making Hong Kong more conventional, they could understand the basis of Hong Kong’s success, strengthen its land lease system, and use it as a model for the rest of China.


As everywhere else, Hong Kong is threatened by conventional wisdom and by land speculators. Because Hong Kong succeeded so well by leasing its land at rates high enough to fund its local government, its success pushed up location values. When government authorities failed to capture this increased land rent, the high site values attracted land speculators who now are trying to reverse the policies that created the success in the first place.

Conventional wisdom offers little in the way of clear thinking or opposition to the rent-seekers. There is little public understanding and little bold leadership by either politicians or academics. The people may well lose the system that had been working so well for them.

The people of Hong Kong are hardly unique in this situation. Wherever the recovery of land rent for public benefit has been instituted and then repealed there has been little or no public outcry since most people do not have any understanding of “land rent” and that it is as a major flow in any economy.

Nor do they have a sound working knowledge of economics or a clear moral understanding of their right to an equal share of land rent as well as their obligation to pay rent to society for the land they claim for their exclusive and private use.

Asking the public to understand all that is asking a lot of anyone. While Hong Kong is threatened by individual predatory speculators, it might be less threatened by the central government. Mainland China is learning firsthand about the dangers of speculation in land and is passing taxes to try to curb the worst of it. Since the Chinese economy is now experiencing real estate bubbles it may soon do what the economies of America and Japan did – implode into recession.

Even if that does not happen, China is still seeking ways to prevent such a calamity and may look to the land value capture policy solution, especially if knowledge of the Hong Kong model could gain currency on the mainland.

This SWOT analysis was written by Jeffery Smith, founder of the Geonomics Society, for use by the UN Habitat Global Land Tool Network’s program on land rights and land value capture. In addition to the references contained within this report, information was gleaned from the Hong Kong section of the book Land Value Taxation Around the World, an anthology compiled by Robert Andelson and available from the Robert Schalkenbach Foundation.

Hidden amid the multi-million dollar high-rise apartments
and chic shopping malls of Hong Kong's urban centers are
scores of tiny, unseen tenements -- some no bigger than
coffins -- that many people call home. ...

He is now among the 1.2 million Hong Kong residents who
currently live in poverty, according to a government
advisory group. ...

For Sze, the "coffin home" phenomenon is the result of an
urban perfect storm: a combination of skyrocketing
real-estate prices and arguably the biggest wealth gap in
Asia. ...

But even the second-tier properties are around 40% more
expensive in Hong Kong than in other global cities like
London, New York or Moscow, the report found. ...

Sze said more than 300,000 people in Hong Kong are
currently waiting for public housing. And although the
average waiting time is three years, many wait in cramped
spaces, like coffin homes, for as many as 10 years.



Hong Kong's poorest living in 'coffin homes'By Benjamin
Gottlieb and Kristie Hang, for CNN
July 26, 2011 7:14 a.m. EDT

Hong Kong (CNN) -- Hidden amid the multi-million dollar
high-rise apartments and chic shopping malls of Hong Kong's
urban centers are scores of tiny, unseen tenements
-- some no bigger than coffins -- that many people call

Mak, 72, has lived in his four-walled "coffin home"
overlooking the city's Wan Chai neighborhood for the past
decade. His entire living space is no bigger than a
twin-sized bed, and has just enough room for him to sit up.

"No one wants to live here, but we need to survive," said
Mak, who works as a janitor at the nearby Times Square.
"It's a step up from being on the streets."

Nicknamed coffin homes for their physical similarities, the
15-square-foot enclosure is just one incarnation of the
city's distinctive low-income housing alternatives. Others
include the city's cage homes, which resemble livestock

Twenty tenants in Mak's building share a communal bathroom
that doubles as a shower. Hallways are clad with slapdash
wiring and bad ventilation -- and bedspaces are stacked
atop one another like kitchen cupboards.

"There's a stigma about those living in these places.
People think that it's because they are lazy, but that
couldn't be further from the truth," said Sze Lai San, a
social worker based in Hong Kong. "Sometimes their jobs
just pay very little despite their long hours and hard
work, or they just fall on hard times."

And Mak is no exception. A Hong Kong native, he went
bankrupt after a series of unsuccessful ventures in finance
and now makes barely enough to cover his rent -- around
$150 a month.

He is now among the 1.2 million Hong Kong residents who
currently live in poverty, according to a government
advisory group.

"I can skip meals, ignore the dirt, bedbugs and stuffiness,
but the biggest problem we have here is safety," Mak said.
"There have been close calls over the years. We're stacked
like sardines, and there are no regulations. We'd all be
dead if a fire were to start."

Knee-deep in debt, Mak refused to give his full name,
fearing that creditors may learn of his whereabouts.

Despite the conditions, Mak's bedspace is one of many
similar facilities licensed by the government. According to
a city ordinance, any flat with 12 or more bedspaces for
individuals under rental agreements must obtain a special

But according to an e-mail from Home Affairs spokesperson
Elain Chu, "the Ordinance was not formulated to prohibit or
illegalize bedspace apartments" and only mandates that
rented apartments meet current fire and safety codes.

The reason being that living conditions are "determined by
various factors, such market situation, economic
environment, personal financial capacity [or a] personal
choice and so on," Chu said.

For Sze, the "coffin home" phenomenon is the result of an
urban perfect storm: a combination of skyrocketing
real-estate prices and arguably the biggest wealth gap in

A 2011 survey by Savills -- a real estate company based in
the UK -- found that the city's top end properties sell for
a confounding $10,550 per square foot.

But even the second-tier properties are around 40% more
expensive in Hong Kong than in other global cities like
London, New York or Moscow, the report found.

Hong Kong: A property boom you can feel

"Hong Kong has gotten more and more wealthy, but these
people have been left behind," she said. "A dweller once
said to me, 'I'm not even dead yet but I'm already living
in my coffin -- four walls and nails'."

A dweller once said to me, 'I'm not even dead yet but I'm
already living in my coffin -- four walls and nails

--Sze Lai San, social worker

Sze -- who has handled cases similar to Mak's for more than
16 years -- said coffin dwellers pay a larger percentage
per square foot for their homes than they would for
high-end properties. She said that in the past year, the
rent for coffin homes has increased by roughly 20 percent.

"There are some very backward practices that should not be
happening in Hong Kong," Sze said. "People in low-income
housing need more rights. They shouldn't be living on the

Sze said more than 300,000 people in Hong Kong are
currently waiting for public housing. And although the
average waiting time is three years, many wait in cramped
spaces, like coffin homes, for as many as 10 years.

Living in a cage in Hong Kong

Through Mak's eyes, there are two Hong Kongs: The one seen
through his only window, personified by the glitz and
glamour the city is famous for. And the one inside, that
has allowed less fortunate citizens fall through the

"It's not that the H.K. government can't help people like
me who are part of the low-income society and need help,"
he said. "It's that they don't want to help people like us
and solve problems like this."



by Walt Rybeck


Jamaica’s early economy was based on agriculture. Discovery in 1942 of vast quantities of bauxite, the ore used to manufacture aluminum, soon brought mining into prominence. More recently, tourism has burgeoned.

In 1943, two decades before Jamaica became an independent member of the British Commonwealth, Jamaica was faced with high unemployment, lack of development and vast tracts of valuable but unused sites. A commission from Britain was called on to explore ways to deal with these problems.

After considerable study, this commission urged the colony to change its property tax from one based on the capital value of the land and buildings to one based solely on the value of the land. The International Bank for Reconstruction and Development in 1952 endorsed this proposal. A few years later, when Norman Manley’s colonial administration took office, Manley liked the idea and asked the United Nations for technical help in assessing the island’s land. The UN invited Australian valuation specialists who helped manage appraisals for their country’s land tax to set the stage for Jamaica’s actual land value tax law, enacted in 1957.

To explain land value tax (LVT) to the people and the parliament, Manley pointed out that the existing property tax on buildings was a heavy tax on labor, on the people “who do more and more with their land,” while those “who do nothing with the land” pay little if any tax. He said LVT, instead of taxing “the labor of man on the land” would tax “the value put into the land by the community.” He stressed that this was a fairer way to raise revenue and said it was needed to spur development. LVT became a popular idea among Jamaica's leaders.

Jamaica, the third largest island in the Caribbean, is divided into 13 parishes. The land tax was begun in two parishes, and was finally implemented throughout the nation in 1977. An advantage of LVT over the traditional property tax is that a relatively few officials can learn land appraisal techniques and then complete the valuations for all parcels. The newly trained Jamaican valuers were able to appraise the land with much more accuracy and in a much shorter time than if they had had to appraise buildings and other improvements on the land.

In St. Catherine and St. Ann parishes, the first two to adopt LVT, it was found that there were many small parcels—over 30 thousand—with land of negligible value, worth 100 Jamaican pounds or less. These were all charged a flat minimal fee of pennies, simply to keep track of ownership titles. On the other extreme were properties worth 20,000 to a million pounds, held by only 78 landlords. The other 10 thousand owners in between the very poor and the very rich, had parcels of modest value. So it was decided to use progressive tax rates, the higher the land value the greater the tax rates.

Because LVT meant lower property taxes for most home owners and businesses, it has remained popular. An official said a few years ago that it would be “political suicide” to try to change it. However, it is a relatively small component of the overall tax base of Jamaica and its full potential has not been realized.

Initially it made sense to keep the total revenue from the land tax the same as had been raised from the old property tax. The intent was to gradually increase the rates to make LVT a more important revenue producer. When Michael Manley (son of Norman Manley) became prime minister, he gave lip service to the land tax. However, he relied mainly on income taxes to raise over 95 percent of the nation’s revenue. LVT remains, but only barely.

Even bauxite, instead of being taxed by LVT, that is, by the value of the ore in the ground, is being taxed on the value of the mineral extracted, making it less competitive than ores elsewhere in the world.


Jamaica demonstrated that many officials and citizens of a poor Caribbean nation understood the benefits of a land value tax (LVT) and were empowered to take the necessary steps to implement such a tax.

Initially political leadership articulated the benefits of the policy in a clear and direct way to the citizens. Community leaders actively supported its implementation.

Jamaican valuers were able to appraise the land with much more accuracy and in a much shorter time than if they had had to appraise buildings and other improvements on the land.


The potential of LVT to stimulate better land use, reduce the large holdings of idle land, and stimulate both production and employment, has not been realized. Before the land value tax /capture rates could be increased to make LVT a more important revenue producer, a change in political leadership (in this case from father to son) made income tax rather than LVT the major source of government revenue.

Despite a good beginning, apparently there was insufficient “grounding” of the concept and practice of LVT in the minds of the people and the political leadership for it to sustain a fuller implementation.


Currently local officials say they have to go hat in hand to the federal government to finance most of their public works and public services. If officials and community leaders were to revisit the concept and practice of LVT they could work to replace the high income taxes that are stifling production while simultaneously reaping more revenue from LVT. This would properly harness incentives to put Jamaica back on the road toward economic prosperity.


The introduction of LVT in Jamaica followed years of careful analysis by some of the world’s leading taxation specialists. If the current generation of officials and community leaders fail to focus on that history and understand the philosophical, ethical, political and economic underpinnings of that history, Jamaica’s potential for leading the Caribbean nations out of widespread poverty, unemployment and exploitation may be lost.


By Gordon Abiama

Nigeria's Land Use Act of 1978 has remained controversial since its enactment. Its flaws arise from a lack of political will on the part of leaders to implement it. Section One of the act states:

“Subject to the provisions of this Act, all lands comprised in the territory of each State in the Federation are vested in the Governor of the state and all such lands shall be held in trust and administered for the use and common benefit of all Nigerians in accordance with the provision of the Act.”

What this act means is that rather than own land in perpetuity, the citizen is granted a right of use.

Nigeria is a country richly blessed with natural resources, mineral, agricultural and marine. Oil, for example, accounts for over 85% of the country's total earnings. Taxes and royalties accruing from the extractive sector make up this revenue base upon which the entire nation is dependent.

Given the wider definition of land to include all natural resources, Nigeria can ably finance all its development needs from taxes based on land rather than taxes on production which are confiscatory and punitive in nature and therefore counter productive. Values of surface lands in all urban centres in Nigeria continue to increase without a corresponding taxation of this socially created value.


The land law recognizes the need to make land available to all persons irrespective of social status or religion by holding land in trust for the people. This law therefore stands against holding land in perpetuity while making land available at affordable price to all via a land lease agreement.

Upon application a land user is entitled to a certificate of land occupancy issued to him by the Governor of any given state in which he resides for the land he wants to improve. This certificate authenticates his use of that land and guarantees him usage without interference. The certificate states the land is leased to him 99 years, after which it can be renewed.

The same land law also clearly differentiates between the land and improvements by assessing and levying them separately. The property/improvement is assessed and the owner is taxed accordingly. And then the land itself is also taxed separately whose rate used to be 1% of the annual rental charge for such properties in the area. Rental here means the amount a tenant pays annually to occupy or live in a building/property.

The fact that over 85% of Nigeria's total earnings come from taxes and royalties taken from the extractive sector, particularly oil and gas, demonstrates that the country can raise more than enough finance to execute public projects without imposing taxes on production which are punitive and confiscatory in nature.

The law on minerals extraction, which came shortly after the enactment of the land use law, vests all authority to extract minerals in the Federal government. This act thus ensures a common heritage to land for all Nigerians irrespective of state of origin and level of locally available resources. This is why the Federal Government makes statutory monthly revenue allocations to all the states of the federation.

However, the allocations are also based on the principle of derivation. An additional 13% is allocated to every state based on the amount of revenue it brings to the federal purse. This ensures justice and equity as it compensates those states which contribute the most revenue to the federal purse.


The lack of political will on the part of the leaders to implement the Land Use Act, rather than ensure a common heritage to land as indicated in its objectives, has led to the confusion and land distribution distortions being experienced today.

Because the law was made to take effect from the date it was enacted, all those who laid claim to perpetual ownership of lands prior to the 1978 date of the enactment of the law were free to continue to hold onto them unquestionably under the customary land tenure system even in urban center and cities. Land owners whose claim of ownership was linked to patrimonial lineage continued to enjoy the proceeds of socially created land values. This resulted in the commodification of land, leading to intensive land speculation with its attendant negative effect on wealth production and distribution.

It is ironic that even those who were instrumental to the enactment of the Land Use Act do not appear to appreciate the aims of the land law to establish a common heritage to land so everyone could have access to land at an affordable price. Many have condemned the law as being an oppressive instrument meant to edge out the average Nigerian and community in socio-economic terms. This might perhaps be a ploy to continue maintaining the current land ownership status quo until the Land Use Act is amended to give them perpetual ownership legitimacy. It is like giving a dog a bad name in order to hang it.

It is in the light of this that one views President Yar Adua’s reason for wanting to amend the land laws as being fraught with many dangers. He told Nigerians:

“We intend to amend the laws so that investors and individuals will own land and use it raise capital for business. At the moment, government owns all land and it is given to individuals on leases.”

On paper individuals own land on leasehold, but in reality the landlords who form the elite of the society do not see their lands as being on leaseholds. Many have held on to their family lands for more than a century without any government intervention.


The main bulk of public revenue for Nigeria comes from taxes and royalties from land and its resources, which if properly and transparently managed, ought to have translated into vastly improved living standard for all Nigerians. Rather than scrap the land policy of leaseholds as is presently constituted in the land laws, the terms of the leasehold should be strengthened to make the policy effective.

What the government is doing is to implement two conflicting policies on land under one law. By recognizing that all who own lands before the 1978 land law should be respected and given that privilege while all prospective land users after 1978 must be on leasehold for 99 years subject to a renewal has created so must confusion.

What the government should do is to summon enough political will to abolish perpetual land ownership structure by holding land in trust for the community. This way access to land by everyone becomes guaranteed and not just for a privileged few who hold all to ransom.

To really do this, the government must depoliticise land distribution as well reduce drastically the time it takes to get approval and be granted land by the government. For now getting a certificate of occupancy from the governor of a state who is authorised to hold land in trust for the people is like passing through the eye of the needle. This way vast lands that are held down by feudal land lords will be freed up for productive use.

The land law also restricts all with statutory right of occupancy from alienating, transferring, assigning or mortgaging it without the Governor’s approval to do so. While this process should not be cumbersome and long drawn. The government should exclude improvements as they are fruits of labour that rightly belongs to the owners who should be free to assign, transfer or even use it as a collateral to secure loans from any financial institution like the bank.

What this means is that the law should be such that if individual land users needed to raise capital from banks, his should be able to use his improvements and not his land as collateral without recourse to obtaining approval to do so from his Governor.

In view of the astronomical rise in land values, especially in urban towns and cities, the ground rent currently being levied could be substantially increased and should fall upon land value only, not the value of the buildings.

Thus, the existence of the Land Use Act is in fact a tremendous opportunity for Nigeria to move ahead with the implementation of land value capture. Broad based knowledge and education of both the populace and public authorities should proceed apace with the training of people who can be charged with the details of implementation, such as establishing transparent web-based land value maps and determining the incremental stages of increasing the percentage of land rent captured for public benefit.


Because undeveloped lands are never taxed, land speculators have cashed in on this seeming lapse by holding down vast lands out of use until such a time as it would be very profitable to sell on the market. This practice of course hampers development in many ways.

Those involved in this evil act of land speculation in most cases are top government officials who with ill-gotten wealth can afford to buy large tracts of land that they keep out of use. Since they are those in authority that are able to effect changes in laws in support land value taxation, it is unlikely that they would support any form of legislation that would change the status quo in terms of land distribution.

The leaders often exploit the loopholes and weaknesses in the land laws to allocate choice lands to themselves and their political cronies at the expense of the common good.

Ruling family members in communities who control large traditional lands engage in land profiteering. They also create undue conflicts that result in costly land litigations and, in many cases, physical clashes leading to deaths and sacking of villages. These people sell lands to more that one buyer resulting in a deadly clash of interests, claims and counterclaims. Land cases in the law courts take years to be decided. This is because a dissatisfied litigant can appeal an unfavourable ruling first to the High Court, then to the Appeal Court and finally to the Supreme Court.

Legal fees and often very expensive and the aggrieved parties must foot such bills themselves or risk losing the case to the richer opponent while the sellers of the land who created the problem in the first place remain on the sidelines content to play the part of court witness.

Often, cases of such multiple land sales occur when certain members of a family who own land go behind others, without a family consensus, sell the land to interested buyers.

Recognizing such social tendencies with regard to family/native lands, deeds of assignments on lands must be signed by more than one family member and in the presence of several witnesses before the government accepts to give a right of ownership to the buyer.

In urban centres like Lagos where much of land is still held by ruling families, the government requires that a prospective landowner who wants to apply for secure land ownership papers from the government must be able to prove he had the land vested on him before 1978 when the land law came into force. The main acceptable proof is the receipt of purchase which must have a postage stamp affixed to it. Any post 1978 postage stamp is unacceptable.

To meet this legal requirement, most land owners who are known for being land speculators have been able to buy up thousands of such postage stamps which they now use in affixing to lands receipts they issue out to buyers.

This SWOT analysis was written by Gordon Abiama, Director, Africa Centre for Geoclassical Economics, Nigeria with notes taken from Land Value Taxation Around the World, an anthology compiled by Robert Andelson and published by the Robert Schalkenbach Foundation.

Pennsylvania, USA

An Examination of the Results Experienced in Four Pennsylvania Municipalities Following Moderate Increases in the Effective Rate of Taxation Applied to Land Values

Edward J. Dodson, M.L.A.
Earth Rights Institute
July 2007

Overview and Summaries for Pittsburgh, Scranton, Harrisburg and Allentown, Pennsylvania, USA compiled by Ed Dodson
followed by SWOT Analysis by Alanna Hartzok



Progressive Momentum

Late in the nineteenth century, an organized citizens movement arose in the United States determined to change the way revenue was raised to pay for public goods and services. With arguments taken from the writings of political economist Henry George (shown immediately below), activists sought to introduce legislation that would exempt from taxation what were defined as productive economic assets and activities. These included all goods produced by labor, including the capital goods on which modern industrialized economies were already dependent. Public revenue would thereafter come from the value of land (i.e., of locations in cities and towns, of agricultural and mineral-laden lands, and from those assets freely provided by nature for human exploitation and use.)


Public support for the wholesale movement toward land values as the sole or primary source for public revenue never materialized. The proposal aroused vocal and well-financed opposition in a nation where landed interests were politically powerful. Yet, decades following Henry George’s death in 1897 were characterized by determined efforts to mitigate the social ills associated with the American System, as it had evolved over the first century of the nation’s existence.

In the Commonwealth of Pennsylvania a small number of elected officials and civic leaders continued to make the case for the reforms championed by Henry George. Working within the confines of state constitutional law, they focused their energy on the system of property taxation and the granting of authority over public finance to local government. What developed was a sustained strategy to promote adoption of a system of property taxation that applied a higher rate of taxation of assessed land values than to the value of property improvements.


Constitutional Authority

Supporters of the two-rate property tax managed to build sufficient support to have the Pennsylvania state constitution amended:


“The sponsors of the measure were able to enlist the support of Mayor William A. Magee for a bill embodying the recommendations of the committee, which was introduced in the State Legislature as a mandatory measure … applying to the two second-class cities, Pittsburgh and Scranton …” i

The bill was signed by then Governor John K. Tener (left) on May 15, 1913, and officials in Scranton and Pittsburgh instructed the assessors of their respective cities to complete the first separate assessment of land and buildings as required by the act.


Unrealized Potential

One of the most important observations by leading political economists of the 18th and 19th centuries was that land values are societally- rather than individually-created. Locations in cities and towns have exchange value because of the aggregate investment in public and private amenities and improvements. Every parcel of land has some potential rental value, depending on the desirability of the location for commerce or residential use. Market forces cause this potential rental value to be capitalized into land prices.


By the time local governments began to impose even modest taxes on land values, land prices had a long history of rising (and sometimes falling) in response to changing market conditions. As the role of local government expanded to include funding of public schools and the development of regional infrastructure, authority to raise needed revenue by the taxation of property was extended to county government and to school districts. Unfortunately, the bill adopted by the Pennsylvania legislature applied to municipal governments only (excepting those organized as boroughs rather than cities, counties and school districts). The result was to greatly negate the potential of the taxation of land values to stimulate economic growth and to push owners of land to develop their land to its highest and best use – as determined by existing zoning and other regulations..



The Early Experience

Pittsburgh’s city council enacted local legislation in 1914 to implement the two-rate property tax structure. Two years earlier, the Housing Committee had published a pamphlet entitled An Act to Promote Pittsburgh's Progress, which recommended that all buildings in the city be taxed at a rate of 50 per cent less than land values, the change to be accomplished by gradual steps.


Combined with a reassessment of all real property in the city, the effects of what was a very modest shift in tax rates were considerable. In particular, construction of new buildings increased almost immediately. At the same time, owners of large, unimproved or under-improved parcels of land organized to have the law repealed. A new mayor sided with these opponents. Although the repealing bill passed the state legislature, supporters of the two-rate property tax also mobilized, and the Governor (Martin G. Brumbaugh) vetoed the bill. What came to be called The Graded Tax Plan (i.e., a two-rate property taxation with a heavier tax rate applied to land values) reached its full initial stage of implementation in 1925, at which time the tax rate on buildings fell to half that imposed on assessed land values.

Two years later, the local newspaper in Pittsburgh, the Post, commented on the changes already brought on by the new two-rate property tax:

“Formerly land held vacant here was touched lightly by taxation, even as it was being greatly enhanced in value by building around it, the builders being forced to pay the chief toll, almost as if being fined for adding to the wealth of the community. Now the builders in Pittsburgh are encouraged; improvements are taxed just one-half the rate levied upon vacant land. Building has increased accordingly.” ii

Pittsburgh had a long way to go to become a livable city. Turning natural resources into steel and other industrial metals was the reason Pittsburgh’s economy grew and its population increased. Its location, at the confluence of two rivers – the Allegheny and Monongahela – to form the Ohio River, provided access to the U.S. interior and markets up and down the Mississippi River. The absence of laws restricting the dumping of chemical wastes into the water or air turned Pittsburgh into a heavily polluted region.


Aftermath of the Second World War

The assessed value of all real estate in the City of Pittsburgh for 1953 was set at $1.065 billion, out of which $414.3 million was on land value and $650.8 million on buildings. The rate of taxation applied to assessed land values was twice that placed on buildings ($32 per $1,000 of value versus $16 per $1,000 of value).


Pittsburgh experienced the same stresses on its economy that plagued most of the older “rust belt” cities of the northern United States. Development shifted to outlying areas of Allegheny County, made accessible by new highway construction. Pittsburgh was not able to increase its land area by annexation, as the city is surrounded by incorporated boroughs and towns. However, the two-rate property tax proved to be an effective tool for revitalization of Pittsburgh’s downtown area after the Second World War.

Pittsburgh’s reputation as an old industrial city, its air and water fouled by pollution, began to slowly change. The area where the three rivers converged was targeted for clearance of old warehouses and railway yards, to be transformed into a new "Golden Triangle." Over $50 million was eventually invested in the development of office towers adjacent to a park established on the site of the historic Fort Pitt. A steady stream of new office buildings, retail stores, and apartment buildings followed throughout the 1960s and 1970s. The character of the city experienced a dramatic change, evolving into communities where residents could live, work and play, and where finance, health care, education, high tech industries slowed what had been a constant out-migration.

A 1992 study by two economic professors published by the Lincoln Institute of Land Policy highlighted the incentive aspect of Pittsburgh’s two-rate property tax:

“Following the change in regimes at the end of the 1970s, Pittsburgh experienced a striking building boom, far in excess of anything that took place in other major cities in the region. The building boom was basically a center city phenomenon; it did not extend to the rest of the metropolitan area. It was moreover, a boom in commercial building activity. The residential sector experienced only a modest increase in new construction. …

“The fiscal reform that accompanied Renaissance II had two important components: the huge increase in tax rates on land and large tax abatements on new structures. It is difficult in any rigorous econometric sense to separate the effects of these two measures. …Our sense is … that these abatements were probably the more important of the two tax incentives that we have considered…

This is not, however, to downplay the role of land taxation. What the Pittsburgh experience suggests to us is that the movement to a graded tax system can, in the right setting, provide some stimulus to local building activity. The primary role of the land tax in all this is to provide the additional source of revenues that allows a reduction in the rate of improvements.” iii


Recent Experience and Ongoing Challenges

Pittsburgh was granted a home rule charter in the mid-1970s, permitting city officials to raise revenue by whatever means they decided upon. A new mayor, Richard Caliguiri, took office in 1977, promising to oppose further tax increases. For 1979 and again in 1980 he proposed raising the city’s tax on wages to raise needed revenue. City Council instead voted to increase the tax on land values.


In 1979, the rate of taxation on land values was increased from 4.95% to 9.85% of assessed value. New construction jumped 22% over the previous year as measured by the dollar value of building permits issued, despite a fall-off in construction and renovation in the surrounding four-county area and in the nation at large. Data on real estate transactions also showed that vacant lot sales increased 16.5% in the first seven months after the land tax increase, indicating that the tax was putting pressure on inefficient landowners to develop their sites.

In 1980 officials increased the tax rate on land values to 12.55%, while reducing the rate on buildings to 2.475% -- creating a ratio of 5.07 to 1. Even with the county and school district taxes considered, the effective ratio was still 2.99 to 1.

After the change in tax rates, construction in 1980 leaped 212% above the 1977-78 average, setting the stage for the city’s second renaissance and the final stages of its movement away from heavy industry. As discussed, the adoption in 1980 of three-year tax exemption on all new buildings -- but not the land – further stimulated construction. In 1981 construction peaked at nearly six times the 1977-78 level. Then, for 1983 the tax rates were increased on both land and buildings – to 13.3% and 3.2%, respectively.

The value of building permits issued annually from 1980 to 1989 was, on average, 70% higher than it was between 1960 and 1979. Meanwhile, the cities of Buffalo, Cleveland, Detroit, Rochester and many others were experiencing declines. Pittsburgh's new construction activity during the 1980-1992 period was actually also equal to 65% of Philadelphia's, though the latter has four times the population.

In 2000, a long overdue Allegheny County-wide reassessment was completed. For the previous twenty years properties had remained assessed at 20 percent of the 1980 market values. The results of the reassessment were challenged by many property owners, particularly those in Pittsburgh. Following a lawsuit against the firm conducting the reassessment, a second firm was engaged to correct the problems. In the midst of this chaotic situation, property owners demanded action, and Pittsburgh’s City Council decided – despite over 80 years of positive experience – to return to a single rate of taxation on land and buildings. The subsequent consequences should have been anticipated. Permits issued for new construction and for property renovation declined in 2001 and have continued to fall each year since then. The city’s overall economy has suffered as a result. A 2006 report ranked Pittsburgh 80th out of 100 major markets for job growth and unemployment rates. iv

Although the Pittsburgh region does not seem to be attracting many new businesses from outside, factors such as increases in suburban land and construction costs, as well as the high cost of automobile commuting, have stimulated a modest redirection of construction investment from the suburbs to the city. Also, demographic trends are driving the movement of higher income professionals and childless couples back into the city. Several thousand new condominium units and apartment buildings have come on the market or are near completion.

Facing severe budget shortfall in 2003, Pittsburgh’s Mayor Tom Murphy argued the city could not increase taxes without risking the loss of more businesses and residents. Critics of the city government recommended the sale of city-owned real estate in order to eliminate a $60 million deficit in its operating budget. The Allegheny Institute, a local policy group, argued that some of the 10,000 properties owned by the city and the local Urban Redevelopment Authority could have been packaged for development and auctioned off. The mayor countered that too much property in the city – nearly one-third, with an estimated market value of $13.5 billion -- was owned by tax-exempt nonprofits. Taxing these properties would raise an additional $70 million annually.

Not surprisingly, no steps were taken to raise needed revenue by imposing taxes on exempt properties. The city’s finances fell into such a desperate state that an Intergovernmental Cooperation Authority (the “ICA”) was established to oversee city finances and the budgeting process.

The current mayor, Luke Ravenstall, assumed office in September 2006 following the death of Mayor Robert O’Connor. O’Connor took office just eight months earlier. The ICA approved a $420 million budget for 2007, anticipating revenue of $7.7 to come from casino gambling. To date, there has been no determined effort made by members of City Council to reinstate the two-rate property tax structure.



The Early Experience

The area around the City of Scranton was settled during the mid-nineteenth century to exploit the vast supply of coal and iron ore for the manufacture of steel. The population had grown to over 35,000 when the City of Scranton was incorporated in 1866. By the turn of the century, the population increased to over 102,000, but the region would soon lose its largest employer, the Lackawanna Steel Company, as the iron ore supplies disappeared.


Thereafter, Scranton’s economy became increasingly dependent upon the anthracite coal industry. By the mid-1930s, the city population grew to approximately 150,000 due to the extensive growth of the mining and silk textile industries. The momentum continued throughout the Second World War, as the need for energy stimulated strip mining operations in the region.

Scranton’s utilization of the two-rate property tax began in 1925, when the rate of taxation on buildings was reduced to half the rate applied to assessed land values. As with Pittsburgh, the effects during the first decades were largely overwhelmed by broader social and economic forces.


Aftermath of the Second World War

In the years following the Second World War, utilities and manufacturing concerns began shifting from coal to oil and natural gas. For the same reasons as other northern regions were experiencing decline, the Scranton area began to lose strength and population.


Scranton’s civic leaders had never made a serious attempt to put the potential of the two-rate property tax to full use. Poor assessments and the inability of the county and school district to participate in the two-rate property tax guaranteed the city would not be able to overcome the forces of social and economic change on the horizon. For the year 1953, for example, the assessed value of all real estate in the city was $98.1 million, of which $39.2 million represented land value and $58.9 million the value of buildings. When one factors in the county and school district taxes on property, the burden on property improvements remained considerable, that on land values comparatively light. This was (and continues to be) generally true throughout Pennsylvania. However, within the communities that have adopted the two-rate property tax, the tax burden carried by buildings is lower than in neighboring communities that continue to impose the same rate on both land and buildings.

A devastating flood occurred in 1955, destroying portions of the city. Two years later, freight rail service to the area was abandoned. Then, in 1959, a serious mining disaster shut down the mining industry, leaving thousands of workers without employment. Supports in the abandoned underground mines started to fail, causing cave-ins destroying large numbers of homes and other buildings in the city. Silk and other textile industries also left the region for lower cost regions of the U.S. or overseas. By the mid-1970s, many of the downtown businesses had closed. The city was in a desperate economic situation.


Recent Experience and Ongoing Challenges

In the face of a declining economy but needing additional revenue to balance the city’s budget, Scranton’s leaders voted in 1980 to almost double the tax rate on land assessments (leaving its building tax rate untouched). The city also exempted all newly constructed commercial and industrial improvements from the property tax for ten years. The result was that Scranton's building permits increased 22% in 1980-81 as compared to 1977-79. By comparison, nearly Wilkes-Barre suffered a 44% loss in building permits issued during the same time period.


In 1982, Scranton’s mayor, James B. McNulty, proposed that his city move all the way to full land-value taxation and eliminate taxes on buildings altogether. Scranton's tax rates at the time were 9.6% on land and 2.55% on buildings. However, the mayor was pressured to delay implementation of the full tax shift because of serious property assessment issues that would have impacted downtown property owners.

Unfortunately, Scranton’s assessments were at the mercy of county officials. The assessments, set by Lackawanna County, had not been adjusted for several decades. The lone downtown department store, The Globe, paid 222 times as much tax per square foot of land as a much newer shopping mall located at the edge of the city. The Globe's downtown land had an assessed value of $26.66 per square foot, while city land beneath mall had an assessed value of just 12 cents per square foot.

In Scranton during the early 1980s, school funding absorbed 58 cents of every real-estate-tax dollar collected inside the city. At the same time, the city periodically increased the rate on land values until, by 1983, nearly $4 was being raised from land taxes for each $1 of taxes on buildings. Here, again, however, the one-rate property tax imposed by the school district and county reduced the overall ratio to only $1.77 of land taxes for each $1 of building taxes.



A bill granting to Pennsylvania’s the third-class cities the optional privilege of taxing land values at a higher rate than improvements was passed by the state legislature in 1951. Since that time, some twenty of these cities have been shifting their municipal tax base towards the capture of land value while reducing taxes on buildings. Among these are the state Capital, Harrisburg, and Allentown. The experience of these two additional cities is described below.




Harrisburg, the state capital of Pennsylvania, is a relatively small city. The population as reported in the 2000 census was just under 49,000. The metropolitan area in which Harrisburg sits had a population of nearly 644,000, and until very recently the city continued to lose population each year.


Harrisburg adopted the two-rate property tax system in 1975. With increases made consistently from that point on, the city today taxes buildings at one-third the rate applied to land values, collecting 36% of all city real estate tax dollars from land. For most of this era, Harrisburg has experienced remarkable political stability. Stephen R. Reed was elected mayor in 1981 and has been re-elected ever since, making him the longest serving mayor of Harrisburg.

During Mayor Reed’s term in office, the city undertook important projects to attract new businesses and residents. A National Civil War Museum was constructed to increase tourism to the city, and the downtown area has continued to attract new job-creating businesses.

According to the Harrisburg Office of Business and Industrial Development, the number of vacant structures, some 4,200 in 1982, has now dropped to less than 500 and over $700 million in new private investment has been attracted. It was, in fact, voted the No.2 "best investment" city in the Eastern U.S. two consecutive years in a national banking institution poll. Crime and fire rates have dropped while businesses, private sector jobs and homes have increased in number after 3 decades of decline. Mayor Reed has stated "our two-tiered rate policy has specifically encouraged vertical development, meaning high-rise construction as opposed to low-rise or horizontal development that seems to permeate suburban communities and which utilizes much more land than is necessary."

Relieved from the burden of heavy taxation, new homes and businesses sprang up. In 1980 there were 1,908 businesses on Harrisburg's tax rolls; in 2002 there were 5,976.

Currently, the City of Harrisburg taxes assessed land values at a rate of 2.44%, while the rate on assessed building values has been lowered to just 0.4. Another way to view this is that Harrisburg now taxes land value six times heavier than building value. Mayor Reed, who has been a strong advocate for working people in his city, described the Harrisburg experience as follows in a 1994 letter to Patrick Toomey, a member of the Home Rule Commission of Allentown later elected to the U.S. House of Representatives:

"The City of Harrisburg continues in the view that a land value taxation system, which places a much higher tax rate on land than on improvements, is an important incentive for the highest and best use of land in already developed communities, such as cities.

“In our central business district, for example, our two-tiered tax rate policy has specifically encouraged vertical development, meaning highrise construction, as opposed to lowrise or horizontal development that seems to permeate suburban communities and which utilizes much more land than is necessary.

“With over 90% of the property owners in the City of Harrisburg, the two-tiered tax rate system actually saves money over what would otherwise be a single tax system that is currently in use in nearly all municipalities in Pennsylvania.

“We therefore continue to regard the two-tiered tax rate system as an important ingredient in our overall economic development activities.

“I should note that the City of Harrisburg was considered the second most distressed in the United States twelve years ago under the Federal distress criteria. Since then, over $1.2 billion in new investment has occurred here, reversing nearly three decades of very serious previous decline. None of this happened by accident and a variety of economic development initiatives and policies were created and utilized. The two-rate system has been and continues to be one of the key local policies that has been factored into this initial economic success here."

Harrisburg’s revitalization continues. A stable tax base combined with steady economic growth has provided the means to address the housing and other needs of the city’s poor and elderly.



The City of Allentown is located in the northeastern region of Pennsylvania and has the third largest population in the state with 105,000 people. Allentown’s City Council voted in 1994 to introduce the two-rate form of property taxation and the change took effect in 1996 after voters overwhelmingly adopted a home rule charter consolidating the powers within the city government. Under the new governmental plan, city officials agreed to freeze all local business taxes and that portion of the property tax applied to buildings. The city would from that point on meet any increased need for revenue by increasing the rate of taxation on assess land values.


In 1997 a small group of major landowners in Allentown attempted to have the above increased reliance on the taxation of land values repealed. A proposal was placed on the ballot for a vote during that year’s election. Had this measure passed, over 80 percent of Allentown’s homeowners would have experienced higher property tax bills. Despite a well-funded advertising campaign filled with false and misleading statements – and the use of an airplane to put their message into the sky above Allentown – the citizens voted to retain the new revenue structure for the city. An important result of the shift was that nearly three out of every four properties in Allentown experienced a reduction in taxation.

Each year since then, the difference between the rate of taxation on land and that on buildings has expanded. The current rates are 3.62% on assessed land values and 0.77% on assessed building values.

Allentown’s new private construction and renovation grew by 32% in dollar value in the three years after it first adopted the two-rate system as compared to the prior three years. Between 1990 and 2000, only around 325 new housing units were constructed in the city. Data is not available on the yearly housing starts. Thus, it is uncertain what percentage of these units benefited by the shift to the two-rate property tax (or by abatements on new construction, low income tax credits, historic tax credit, or other subsidies).

Allentown’s use of the two-rate property tax over the past decade has cushioned the impact of broader economic factors affecting other cities in the region, particularly Bethlehem (which continues to tax land and buildings at the same rate). Manufacturing, at one time the dominant activity in the Allentown metropolitan area, now provides just 15 percent of total employment in the area. The service sector now dominates employment, concentrated in the areas of health services, education and government. Jobs in health services continue to grow at a rapid pace; many businesses report having trouble finding qualified workers to fill available positions. Unfortunately, the suburban areas have been the primary beneficiary of some 33,000 new jobs created between 1996 and 2004. The metropolitan area has been selected as the headquarters or principal plant locations for major corporations such as Mack Trucks and Bethlehem Steel, as well as Fortune 500 companies Air Products and Chemicals, and Pennsylvania Power & Light Corporation. These last two companies are physically located in the City of Allentown. Consistent with the current trend in many Pennsylvania cities, the largest employer in the city is a hospital – Lehigh Valley Hospital -- with 6,500 employees.

Civic leaders in the City of Allentown are attempting to reverse the city’s fortunres. The Allentown Economic Development Corporation (AEDC), a nonprofit corporation managed by a board of directors representing the leaders of business, industry, civic groups, and city government, has as its mission the long-range economic growth and diversity of the city of Allentown. AEDC operates the Bridgeworks Enterprise Center, a facility that offers tenants shared centralized services such as educational business counseling and management and financial assistance. Relocation assistance is available for those companies that outgrow the incubator space.

Allentown is another city in an early stage of responding to a reverse migration of people from the suburbs into urban neighborhoods. Quality of life decisions are the same in the Allentown area as elsewhere in the United States (e.g., the escalating cost of owning an automobile and rising suburban property taxes are making urban living once again attractive. An aging population is once again finding urban living more convenience, and the cultural amenities of cities attractive once there are no longer school-age children in the household.

City officials and real estate developers are responding to current demographic trends and to the potential demand for residential housing in and near the center of Allentown. New residential housing as part of a mixed-used development on a former industrial property along the Lehigh River is now underway. Several turn-of-the-century industrial facilities are to be renovated under a public-private partnership utilizing a combination of public and private funds. The anchor is the America On Wheels Transportation Museum, under construction in a former Lehigh Valley Transit Company building. Other amenities include a river walk and a tie-in to the Delaware and Lehigh Canal, as well as boating activities along the river.



Pennsylvania is a state struggling to retain and attract new businesses. With a population of 12.4 million, the state is still among the most populous in the nation; however, seniors now comprise a higher percentage of the total population than in any state except Florida. Although the state’s economy is ranked among the top ten states, economic output per-capita is just 26th.


The demands on state government to play an increasing role in raising and distributing revenue to financially-troubled communities are considerable. Seniors, in particular, have become very frustrated by constant increases in property taxes, and elected officials concerned about re-election to office have responded with a broad range of proposals to address these concerns. Pennsylvania established a state lottery in 1972, and thru 2003 the lottery raised $13.8 billion for state programs. Casino gambling has now been introduced into the state as well, with one-third of the state revenue reserved for property tax relief.

Virtually ignored by the current Governor, Edward Rendell, and his team of advisers is the real potential to stimulate Pennsylvania’s economy by encouraging its taxing jurisdictions, particularly the school districts, to look at the two-rate property tax as an important component of the solution to the state’s problems.

Another development has recently occurred with important implications for all Pennsylvania communities. A Common Pleas Judge, R. Stanton Wettick, has ruled that the failure to keep property assessments current with changes in market value is unconstitutional. This decision has prompted Allegheny County officials to file an appeal to the state Supreme Court. If the higher court affirms the ruling of the lower court, all counties in the state would be required to modernize their assessment systems. Accurate assessment of land values would appropriately and effectively shift the burden of taxation from property owners living in areas with declining land values to those benefiting by rising values. There is almost always a strong correlation in such cases between land values and the quality of public goods and services available.



The history of the two-rate property tax in Pennsylvania provides strong evidence that communities adopting even a modest tax shift in the direction of land values experience real benefits. The greater the tax shift, the greater the benefits. The Allentown case also demonstrates that when the logic behind the tax shift is clearly explained, they will vote to continue its use even when powerful vested interests are mobilized against the idea. However, Pittsburgh’s recent experience demonstrates that even the best public policies can and do suffer when elected officials feel threatened by public outrage over wholly unrelated matters. Harrisburg has benefited by having knowledgeable and dedicated leadership holding the Office of Mayor for almost three decades.


What happens in these and other cities in Pennsylvania in the future will continue to depend on thoughtful civic leaders willing to support change from what their communities have been doing almost since they were settled. Every year that goes by adds to the body of data available to compare the experience of two-rate cities to neighboring one-rate cities. The Philadelphia-based Center for the Study of Economics monitors construction permit data across the state and consults with communities expressing an interest in adopting the two-rate property tax. The Center’s newsletter, Incentive Taxation, reports on the progress achieved by new and existing two-rate cities. Concluding a study on the two-rate property tax for officials of the City of Johnstown, Pennsylvania prepared in February, 2005, The Center’s director, Joshua Vincent addressed the question of how this measure helps those at the lower end of the socio-economic ladder:

“The poor own little or no land and use very little. They will pay the smallest share of land tax. The middle class owns the land under their homes. They will pay modest land taxes. Corporate, absentee or wealthy individuals own the most valuable land. They will pay most of a land tax. “



i Percy Williams. “Land Value Taxation: The Pennsylvania Experience.” Land Value Taxation Around the World, Robert V. Andelson, editor (New York: Robert Schalkenbach Foundation, 1955).
ii Quoted in: Ibid.
iii Wallace Oates and Robert Schwab. “The Impact of Urban Land Taxation: The Pittsburgh Experience.” (Cambridge, MA: Lincoln Institute for Land Policy, 1992), pp.
iv Quoted in: Ben Semmes. “Pittsburgh Placed Near Bottom of Country’s Labor Market, Survey Says,” Pittsburgh Business Journal , September 29, 2006 “While Pittsburgh's economy has stabilized in recent years, the region's labor market lags behind those of most other major metropolitan areas, according to a new study by Bizjournals, a unit of American City Business Journals, the corporate parent of the Pittsburgh Business Times. …Pittsburgh ranked 80th out of 100 major markets in the survey, which focused on job growth and unemployment rates. Bizjournals used a nine-part formula to analyze midyear data from the U.S. Bureau of Labor Statistics, covering 2001 to 2006.”





Strengths: City council enacted local enabling legislation which, combined with a reassessment of all property and a modest shift towards land value taxation, resulted in the construction of new buildings almost immediately. Supporters have sometimes successfully mobilized political forces to maintain and further the policy, which proved to be an effective tool for revitalization of Pittsburgh’s downtown area after World War II. The character of this formerly degrading steel manufacturing city experienced a dramatic change, evolving into communities where residents could live, work and play, and where finance, health care, education, high tech industries slowed what had been a constant out-migration. A 1992 study concluded that “the primary role of the land tax is to provide the additional source of revenues that allows a reduction in the rate of improvements.” Data on real estate transactions have conclusively shown that the tax encouraged owners of underutilized sites to develop their sites or sell to those willing and able to do so.


A bill granting to Pennsylvania’s the third-class cities the optional privilege of taxing land values at a higher rate than improvements was passed by the state legislature in 1951. Since that time, some twenty of these cities have been shifting their municipal tax base towards the capture of land value while reducing taxes on buildings.

Weaknesses: There has been considerable inconsistency in support for and application of the policy throughout the past several decades. Sometimes the City Council was favorable while its mayor was opposed, and sometimes the reverse occurred. Although the policy has proven to be important to the economic health of the city, insufficient understanding of this policy on the part of both city officials and civic leaders, particularly as it interfaced with a recent land value reassessment, resulted in a reversion to a single rate of taxation on both building and land values.

Opportunities: After the year 2000 reversion to a heavier tax on buildings and a lighter tax on land values, permits for new construction and for property renovation have declined each year thereafter and the city is facing a severe budget shortfall and has fallen into a desperate state. There is now an opportunity for public officials and residents of Pittsburgh to learn from their decades of experience with taxation policy, to realize that the land value taxation approach resulted in the most favorable conditions for the city, and to reinstate and expand this approach to financing their city.

Threats: Owners of large, unimproved or under-improved parcels of land, which pay more than owners of well-utilized urban sites, have sometimes organized to have the law enabling LVT repealed at state or municipal levels. When a chaotic situation regarding property reassessment emerged this, combined with lack of widespread understanding of the benefits of land value based taxation, resulted in a reversion to heavier taxation of improvements compared to land.



Strengths: In 1925 Scranton reduced its tax on building values to only half as much as land values. In 1980 city leaders voted to almost double the tax rate on land with no additional tax on buildings. Building permits increased significantly (22%) in 1980 – 81 compared to 1977-79. A similar city nearby (Wilkes-Barre) which taxed improvements heavier than land values suffered a 44% loss in building permits issued during the same time period. A Scranton mayor who understood the benefits of shifting the tax policy to a system of land value capture proposed to fully implement a land value tax based system and eliminate all taxes on buildings.


Weaknesses: Poor assessments and the lack of civic leadership in support of the shift to land value based taxes blocked and inhibited the implementation of this public finance approach. The lack of enabling legislation on the state level disallowed the city to shift its tax base towards land value capture for the county and school districts. Although the region around this city has been a storehouse of natural resources including coal, oil and natural gas, there was no momentum to capture these resource rents for the benefit of the people as a whole. Improving infrastructure, education and other amenities which would have then likely enabled emergence of a more diversified economy to mitigate the booms and busts of a largely resource extractive economic base. The lack of an integrated, holistic approach to resource rent capture has impeded social and economic progress.

Opportunities: There are city officials and university officials of Scranton who understand the benefits of the land value capture policy approach. They could bring together civic and grassroots leaders to develop and promote a program for full implementation of land value capture for the city. Such a program would include passage of state enabling legislation for land value capture for counties and school districts, accurate assessments of both surface land and mineral resource values, a transparent land value capture implementation plan, and broad public education about this policy approach.

Threats: Pressure to delay implementation to a full land value tax shift arose because of serious property assessment issues. The fact that Scranton area school districts were not permitted to shift towards land value capture because of lack of enabling legislation on the state level has considerably diluted the potential benefits of land value capture for Scranton.



Strengths: This city began the shift towards a land value based tax system in 1975 and from that point on continued to decrease the tax rate on buildings while increasing the tax rate on land value. For most of this era, Harrisburg has experienced remarkable political stability, undertook important projects to which successfully attracted new job-creating businesses and residents.


This city had previously experienced severe economic distress but with the new tax policy successfully harnessing economic and social forces the number of vacant structures dropped substantially and the city was considered the second "best investment" city in the Eastern U.S. two consecutive years in a national banking institution poll. Crime and fire rates have significantly decreased while businesses, private sector jobs and homes have increased in number after three decades of previous decline.

Currently, the City of Harrisburg taxes assessed land values at a rate of 2.44%, while the rate on assessed building values has been lowered to just 0.4. Another way to view this is that Harrisburg now taxes land value six times heavier than building value. Mayor Reed, who has been a strong advocate for working people in his city, described the Harrisburg experience as follows:

"The City of Harrisburg continues in the view that a land value taxation system, which places a much higher tax rate on land than on improvements, is an important incentive for the highest and best use of land in already developed communities, such as cities.

“With over 90% of the property owners in the City of Harrisburg, the two-tiered tax rate system actually saves money over what would otherwise be a single tax system that is currently in use in nearly all municipalities in Pennsylvania.

“We therefore continue to regard the two-tiered tax rate system as an important ingredient in our overall economic development activities … and one of the key local policies that has been factored into this initial economic success here."

Harrisburg’s revitalization continues. A stable tax base combined with steady economic growth has provided the means to address the housing and other needs of the city’s poor and elderly.

Weaknesses: Property taxes which pay for education are a substantial portion of local taxes in Pennsylvania, usually substantially more than half the local tax base. However, school district taxing jurisdictions are not permitted by the state of Pennsylvania to shift their tax base towards land value capture because enabling legislation has not yet been passed at the state level. Therefore school districts continue to tax buildings and other improvements to the city at a significantly higher rate than land values. The inability of Harrisburg’s school districts to shift to land value taxation significantly dilutes the ability of the city to further increase the benefits to be derived from this tax policy. For example, the need for additional affordable housing in the city could be better met if all taxing jurisdictions could untax buildings and improvements and encourage full utilization of valuable land via land value capture. Another weakness of this policy in Harrisburg is the fact that a significant land area of the city is utilized for state government buildings and therefore is untaxed.

Also, unfortunately there is currently no attempt being made to educate the public about the benefits of their city’s tax policy and therefore there is no citizen mobilization to extend this policy approach via the passage of statewide enabling legislation for the land value tax option for school districts. This is unfortunate in that Harrisburg is the capitol city of Pennsylvania and the legislative offices are all located in the heart of the city.

Opportunities: The fact that Harrisburg has experienced such a strong economic turn-around under this tax policy is a factor contributing to Mayor Steven Reed having been voted Number One Mayor in the United States and Number Three Mayor in the world in 2006 and a resulting high visibility for the city. In that the benefits of this tax policy have been well documented and well articulated, the opportunity exists to further this policy approach via the building of a populist movement in the city to lobby for enabling legislation for school districts. With passage of such legislation the city would be well-positioned to further increase the overall benefits of this approach to public finance.

Threats: With so few public officials and civic leaders who fully understand the several advantages of their city’s public finance policy approach there is a threat that whenever a new mayor is elected the city could revert to a regressive form of taxation policy in future.



Strengths: The City Council voted in 1994 reform local taxation and the change took effect in 1996 after voters overwhelmingly adopted a home rule charter consolidating the powers within the city government. The plan was to freeze all local business taxes and that portion of the property tax applied to buildings and from that point on meet any increased need for revenue by increasing the rate of taxation on assessed land values. Despite an attempt by a small group of major landowners in Allentown to thwart this policy, the citizens were well-informed about the benefits of this approach via a grassroots educational campaign and voted to retain the new revenue structure for their city.


An important result of the shift towards a land value based public finance system was that nearly three out of every four properties in Allentown experienced an immediate reduction in taxation, including the great majority of homeowners. Those who paid more under the new system held sites that had not been fully utilizing their capacity to contribute to the overall well-being of the city.

Each year since 1996 the difference between the rate of taxation on land and that on buildings has expanded. The current rates are 3.62% on assessed land values and 0.77% on assessed building values. Allentown’s new private construction and renovation grew by 32% in dollar value in the three years after it first adopted the this system of taxation as compared to the prior three years. The city also benefited by abatements on new construction and low income tax credits.

Weaknesses: Allentown, as is the case with most of the other cities in Pennsylvania which have been shifting their tax base off buildings and building improvements and onto the value of land sites, cannot utilize this system for the purposes of financing their public educational system which is a substantial portion of local tax needs.

Opportunities: Service sector jobs are plentiful especially in the areas of health services. Many businesses report having trouble finding qualified workers to fill available positions. If these businesses were to be better informed about the benefits of land value based public finance system they would have the potential to build and support a civic movement for state enabling legislation to fund Allentown’s school district via land value taxes and thereby strengthen and improve public education in order to train workers to fill these positions.

Allentown is another city in an early stage of responding to a reverse migration of people from the suburbs into urban neighborhoods due to the escalating cost of owning an automobile, the rising of suburban property taxes, and an aging population which is finding urban living more convenient and attractive. These newcomers to the city should be given information about the benefits of land value taxation in order to continue to build a populist base of support for the continuance and augmentation of this tax approach.

Threats: An insufficient knowledge base on the part of either the general public or local elected public officials could undermine the progress of implementation of this policy approach here as elsewhere. Also there is a threat on the level of state government, where some members of the state legislature, uninformed about the benefits and success of this policy in the municipalities, has led them to put forth bills to replace property taxes with income taxes. If such bills were to pass this policy approach would be seriously undermined in Allentown and in all other towns and cities of the state.


Overall SWOT Analysis for the state of Pennsylvania, USA:

Strengths: In the Commonwealth of Pennsylvania a small number of elected officials and civic leaders have successfully made the case for the land value capture/tax policy. Working within the confines of state constitutional law, they managed to build sufficient support to have the Pennsylvania state constitution amended several times, each time extending this policy option to a greater number of municipalities throughout the state.


Based on the experiences of the nearly two dozen cities and towns which have been reforming their local tax system in this direction, usually in small steps, the benefits are noted from one to three years after implementation. The benefits have been measured primarily by researching and tracking the increase in both the number of building permits and building values. The fiscal and social conditions of the municipality usually improves as a result of this enhanced utilization of valuable urban land sites. There is a direct relationship between the degree to which the policy is implemented and the benefits observed as a result.

These cities have usually taken a gradual but steady approach toward this system of public finance within their capacity at the local level. In most cases they have been reducing taxes on buildings and building improvements while capturing more of the economic rent from land values. Thus benefits have been attained via a tax shift rather than the need for an overall increase in the tax burden. When civic leaders who understand this policy approach do see a need to increase taxes, they have chosen to capture more of the economic rent of land rather than raising taxes on workers, homes or productive capital.

Citizens of the third largest city of the state have demonstrated that, with sufficient information concerning the benefits of this approach, it can be voted into effect by popular referendum.

Experience with this policy in Pennsylvania provides solid examples that shifting public finance towards land value taxation while decreasing taxes on the built environment properly harnesses market forces for development while curbing land speculation and land price escalation, thus maintaining and furthering housing affordability.

Recent developments in information technology have been pioneered in the state of Pennsylvania and have proven to be very useful for both public education and fair and efficient implementation of land value capture policy.

Weaknesses: By the time local governments began to impose even modest taxes on land values, land prices had a long history of rising (and sometimes falling) in response to changing market conditions. As the role of local government expanded to include funding of public schools and the development of regional infrastructure, authority to raise needed revenue by the taxation of property was extended to county government and to school districts. Unfortunately, the bills adopted by the Pennsylvania legislature which enabled the shift to land value taxation apply to municipal governments only, not to school districts and counties. The result has been to weaken the potential for a fuller implementation of this policy approach.

A full land value capture/taxation system does not simply impose another tax but would substantially lower or eliminate taxes on labor, especially for lower income workers. A state legislature does not have the power to reduce or eliminate federal payroll and other income taxes. The income tax burdens at the federal level weakens what would otherwise be an enhanced purchasing capacity for workers if their taxes were decreased. If income taxes were to be decreased, this combined with the affordable land access which is maintained and furthered by land value capture, could substantially address the problem of poverty and need for more affordable housing.

Sometimes the opposing voices of the small minority of citizens who would have to pay more in order to pay their fair share under this approach have been stronger than the voices of the majority who would have to pay less while still paying their fair share.

Insufficient information or misinformation on the part of public officials and civic leaders concerning how to interface property assessments and land site valuation with the land value capture policy have sometimes resulted in set-backs to this approach to public finance.

There has been insufficient public education and information dissemination about the benefits of land value capture policy at both the state and local levels. As a result a broader utilization of this approach is not being adopted as rapidly as could otherwise be the case.

Opportunities: The knowledge of how to implement this policy and the benefits of this approach have been clearly demonstrated in a number of cities of Pennsylvania. This should make it possible for other cities and taxing jurisdictions to enact it with confidence.

Cities currently enacting this policy to some degree could take stronger steps in this direction.

Enabling legislation which would extend this policy option to school districts has been written and awaits legislative sponsorship and an organized citizens movement to promote its passage through the state legislature.

The states largest city – Philadelphia – has its school district boundaries coterminus with its municipal boundaries and thus under existing law is permitted to implement land value capture on a broader basis than currently existing examples. A detailed “Tax Structure Analysis Report” was prepared, printed and distributed by the office of the city controller and recommends a shift to land value capture policy. Significant momentum of citizen support to implement the policy has been generated.

Threats: Well-organized and powerful lobbies for big land and real estate interests at both state and local levels have sometimes effectively worked against this policy approach.

The governor and most members of the state legislature have insufficient knowledge and information about the benefits of land value capture/taxation policy. They are under the erroneous belief that property taxes are regressive and that income taxes are more progressive. The risk is that the state legislature could pass legislation that would freeze or eliminate property taxes (and this would include land value taxes) in favor of increased labor income taxes.

The public at large lacks both information and leadership concerning the benefits of capturing primarily the economic rent of land rather than placing tax burdens on their homes, labor and productive capital. Thus the overall zeitgeist concerning tax policy combined with the incapacity of state and local government to reduce federal income taxes yields a significant impediment to full implementation of land value taxation in the state of Pennsylvania.



Singapore SWOT Analysis

by Jeffrey Smith


The story of Singapore – which developed rapidly from poverty to an industrial society – is much like that of its more famous counterpart, Hong Kong. Both were British colonies founded over a century and a half ago and both retained their land in the public sphere – Hong Kong 100% and Singapore 80%. Most importantly, both recovered sizeable amounts of land rent, and kept taxes low. As did Hong Kong, Singapore averaged 6% growth per year over three decades in the latter part of the twentieth century. Today, the two are among the world’s busiest ports, are centers of industry and finance, and enjoy budget surpluses, unique among governments anywhere.

Singapore’s four million people live on 650 square kilometers hemmed in by water and near a much larger land mass. Because population density is high relative to the amount of land in Singapore its price of access is at a high premium. Hence locals and some outsiders do make many speculative investments in real estate but due to zoning and land lease payments they can not so easily keep sites out of use while anticipating a rise in site value. However, given the money to be made from buildings, speculative investors can profit without resorting to being “a dog in the manger” and keeping lots vacant.

During its formative years, Singapore was a pure “single-tax” enclave meaning that its only source of public revenue was from land, aside from “sin taxes” on opium and liquor. The ideal did not last; eventually, government began to tax the income of workers and business enterprise, albeit at rates lower than in the rest of the developed world.

Now nearly 200 years old, in 1959 Singapore gained its independence from Great Britain and from Malaysia in 1965. However, much of the city’s legal and administrative system remains British and tolerates very little corruption. As is done in the UK, they assess real estate as a unit. They tax commercial property at 12%, which is higher than most rates around the world.

If government were to ignore the value of improvements and assess and charge for only the value of the location, that would be much more efficient for assessors and fair for builders, building owners, and residents. Assessors would not need to tally up every minor improvement and its age (its depreciation). Builders would not have to budget for the tax and reduce construction quality. Owners would not be maintaining their tax liability by maintaining their building’s quality. And residents could live in homes and neighborhoods that harmonized with the natural environment.

In environmental circles, Singapore is famous for pioneering a kind of land tax. This tax does not fall on permanent occupants of land in buildings but on temporary occupants of land in cars; that is, Singapore taxes traffic, one’s short-time displacement of all other vehicles from a moving spot on a public roadway. Along with other disincentives to drive, Singapore started pricing for road usage in 1975. The policy has worked well as drivers rarely encounter any traffic jams.

Singapore’s traffic tax is a major revenue raiser. It collected $$4.2 billion in 1994, almost half as much as their leasing of land, $$8.7 billion, which was a bit more than their income tax (personal and corporate) revenue at $$8.3. Since 1968, the government has enjoyed a surplus every year and so has lowered income tax rates. Logically, they could even eliminate that tax and just recover more site rent.

To shelter the populace from high land prices, Singapore builds numerous mass-produced apartments and now 86% of the population lives in public housing that they lease from the government at a subsidized rate for 99 years. An alternative would have been for government to collect all the land rent – high as it would have been – and paid residents a housing voucher or dividend. When spending that extra income on housing, local people could have had more say in determining the construction – the location, the building’s appearance, the “bones” (its internal quality), the esthetics, and other amenities, so that architecture could have flourished as an art instead of having been a public works project.


The main strength of Singapore is not contemporary but historical. At its inception it thrived for a decade as a land value capture only system of public finance. It grew, it prospered, and it proved to the world that the ideal can be real.

Another major strength of Singapore is that it is a tropical city, crowded with people, yet they do not suffer tropical diseases that so debilitate populations elsewhere around the equator. Singapore is an orderly society with a functional and representative government that provides the basic infrastructure for its people plus extra programs beyond mere roads; that is, both public health and public housing are world class.

Singapore, while still leaving lots of land rent on the table, recovers much more than most other developed nations. In other countries, the contribution to the pubic treasury of the property tax – the nearest proxy for a land tax – is a mere fraction of what it once was. In Singapore, public leasing of urban land raises more money than any tax, supplying funds for two-fifths of the government’s budget.

Each year, Singapore has a budgetary surplus! The surplus, as is also true of Hong Kong, is indeed impressive in this era of budget shortfalls and enormous public debt all over the planet. That surplus could be even fatter if the government were to take a bigger portion of the rent for the land it owns.

As with Hong Kong, Singapore ranks at the top of lists that rate nations for both prosperity and freedom.


Since its history parallels that of Hong Kong, Singapore shares some similar SWOTs. Its very existence as an example of land value capture is somewhat of an historical accident rather than a clearly thought out and intentional approach to public finance. Accidents, of course, are hard to replicate elsewhere. And perhaps few people want to see or acknowledge a good idea that was initiated during a time of imperialism and colonialism.

Another weakness is that after successfully beginning with land rent only for public revenue the government started to tax businesses and residents. It failed to recover all the rent for the people as a whole.

Further, the government does not assess and charge for use of locations exclusively but bundles up the value of the building and other improvements into its final assessment. While an easier approach conceptually, it’s actually less efficient and lacks any moral basis. The public generates the value of the location and can rightfully Claim the full land rent. But the owner generates the value of the building; his of her neighbors have not a just claim on that value.


Singapore’s policy is to recover all the land it once lost and again become purely a public land jurisdiction like its sibling city-state, Hong Kong. Complete public ownership of all land may make it easier to raise the rates and recover more rent, while at the same time diminishing taxes on income.

There may be an opportunity to improve Singapore’s assessments so that they separate the values of location and improvement. Because the city-state prospers, it attracts a lot of immigrants – as does Hong Kong. With the constant influx of new residents, there is a constant need to erect new housing. Perhaps architects and builders would relish the opportunity to put their best foot forward and deliver society the best designs and structures, uninhibited by a tax on buildings.

Further, as places like Vietnam – also where all land is public – eventually catch up, then to compete Singapore may have to appeal to business even more and shift taxes off income while raising the rates in its leases for valuable commercial and industrial sites.

Because Singapore enjoys a surplus, it could experiment with paying its citizens a dividend. Receiving an extra income, residents could afford to get by comfortably with less support from the state. With a state that’s less involved in every aspect of people’s lives, then people could enjoy more freedom. Instead of being obedient, people may just behave responsibly, since the dividend would reinforce their sense of belonging to their larger community.

Because of its geo-political location, Singapore is Chinese and capitalistic but also close to the Muslim world. Because Singapore had no resources yet developed, perhaps it can serve as a model to Muslim governments that are seeking ways to develop before their oil runs out. If Singapore is to be a model, it’d be best if it also achieved a bit more personal freedom for its citizens and adjusted its economic policy accordingly


Singapore’s public collection of land rent seems to be less threatened than that system is in other parts of the world where still in use. The city-state is committed to acquiring all the land that previously had been sold off to individuals.

However, because there is so little understanding anywhere of both the morality and the practicality of land value capture – of recovering and sharing land rent in lieu of taxing people’s efforts and wealth – there is always the danger of backsliding.

It is conceivable that Singapore could reduce its terms in its leases for locations. It could impose new taxes. It could kill the goose that laid the golden egg. At this time here is no indigenous movement to protect and further the benefits of the land value capture approach to public finance. The academics do not know what they have and how well it works. The moral and religious leaders are likewise marching to a different drum.

There is a great need for the citizens of Singapore to understand this important basis for an economic system that furthers both freedom and fairness in wealth generation.

This SWOT analysis was written by Jeffery Smith, founder of the Geonomics Society, for use by the UN Habitat Global Land Tool Network’s program on land rights and land value capture. Information was gleaned from the Singapore section of the book Land Value Taxation Around the World, an anthology compiled by Robert Andelson and available from the Robert Schalkenbach Foundation.

Prof Roger Sandilands (University of Strathclyde, Glasgow; Senior lecturer, National University of Singapore, 1982-84 and 1990-94) writes to endorse Jeffery Smith’s survey of the various ways in which Singapore has captured land values for the public purse. Though my knowledge of Singapore is now somewhat rusty, the following notes may be helpful:

1. The Singapore government is always saying that the country's only resource is its people and its wonderful government. Jeffery repeats the mantra that Singapore developed despite having no resources. But Singapore is blessed with a deep, sheltered natural harbour in a fantastic geographical location between East and West through which all the shipping of east-west trade (as well as of the immediate hinterland) must pass. This great potential was what Sir Stamford Raffles recognised when he established Singapore as a British possession in 1819. It has been the preeminent regional centre of trade and business ever since, with the associated increases in land values. Some of my students were led to believe that Singapore had almost nothing until they gained self-government in 1959 and independence a few years later. This, however, is not to belittle the great achievements since then.

2. One could mention the very important role of the Central Provident Fund (CPF) in the financing of housing and infrastructure. At its peak in the early 1980s, employers and employees (as well as self-employed) each had to contribute 25% of their wages to the CPF. Thus someone earning $1000 a month had to pay $250 into the Fund and the employer another $250. This money goes into a personal pension pot for the employee (so that her total monthly income is not $1000 but $1250) and he or she cannot touch this fund (which always earns a small positive real interest rate) until retirement, except for certain specified purposes. The main exception is that one's CPF balance can be used as a down payment on the leasehold purchase of an apartment and thereafter to service the mortgage. This was a source of non-inflationary finance for the massive housing and infrastructure that has occurred over the last 50 years and that has contributed significantly to Singapore's impressive rate of economic growth. With about 90% owner occupied housing, these real assets represents part of people’s pension. The balance in each individual’s personal pension pot on retirement finances most of the rest of their retirement needs without much need for a subsidy. It also gives the people a real stake in Singapore and thus discourages emigration (which many would like to do otherwise, for the greater sense of freedom many feel in countries such as Australia or New Zealand. Secondly, CPF balances can be used to buy approved shares, for example in the Singapore Bus Company. Also some can be used to finance higher education fees; and some is set aside in “Medisave” to offset medical costs, if any.

3. There is no mention of the important Land Acquisition Acts. These have enabled the government to obtain land from owners at historic pre-development prices, thus reducing the cost of projects deemed of significant social purpose. However, note that road-widening schemes or new MRT stations, for example, have a big value-enhancing influence on adjacent land that has not been compulsorily purchased. Fairness dictates that those beneficiaries pay for the benefits through land value capture.

4. Jeffery is right to stress that traffic “taxes” are another major source of state revenue. But these are not like ordinary taxes. Much of it comes from the auctioning of “certificates of entitlement” to cars, trucks and motorcycles. The COEs are strictly limited according to the increase in the carrying capacity of the nation’s roads – say about 1.5% a year. This is greatly below the rate of growth of demand. Thus in some years the cost has risen spectacularly (to as much as US$50,000 or more for a car with an engine greater than 2000cc, for example), and this is on top of large import duties. But these are payments for a direct benefit – a car or motorbike or truck – and as such is not really a tax. Meanwhile all these things help to keep income taxes very low, even on very high incomes. People are reasonably happy to pay big sums into their CPF accounts whereas similar sums captured through taxes would be much more resented.

5. One other road “tax” that could be mentioned (as another resource rent capture) is the extensive operation of congestion charges for the Central Business District.

6. Lastly, I recall a government campaign to foster “shared community values”. This was mainly aimed at promoting ethnic harmony, but the government was soliciting ideas. My idea was that the community values that should most demand to be shared are, of course, resource and location rents.

Roger Sandilands

South Africa, Republic of

By Godfrey R .A. Dunkley

Revised August 9th. 2007

History Of Land Taxation

South Africa has a long history of collecting a portion of land rent as revenue. In 1652 the Dutch East India Company asserted its right to the land in the western Cape. Under Jan van Riebeeck the settlers had only tentative rights to the land at the discretion of the Governor, for which they paid a land tax or quitrent, according to its agricultural quality. In 1714 a fee of twelve riksdollars per annum was charged for grazing land and a tithe of one tenth of the crop for sowing land. In 1731 farmers were allowed to register land in erfpacht for fifteen years with an annual payment of twenty-four riksdollars for a sixty morgen farm. Some were later converted to freehold with a minimum payment of twenty-four riksdollars per annum plus an additional amount on the more valuable farms, to be assessed by officials. 1.

Sir John Cradock introduced Perpetual Quitrent in 1813 allowing holders of land on loan to establish security. The maximum size of a farm was to be three thousand morgen and the annual fee not to exceed two hundred and fifty riksdollars, but this could be increased at a later date. 2.

As the Boer farmers gradually migrated to the east in later years, so the British government followed with a demand for land tribute, which resulted in the Great Trek into the hinterland, namely the Orange Free State and the Transvaal, where for a while they were free. With the establishment of both these territories as republics, farms were laid out on the principle of putting in four pegs during a one hour gallop on horseback. First come got the best land. Their payment was rent in the form of service, that is, the provision of one man, one horse and one rifle when needed to preserve the peace or defend the land. As in Europe this service gradually gave way to other forms of taxation.

After the establishment of the Union of South Africa in 1910 most municipal rating was based on the total value of both land and improvements. At that stage the Labour Party of South Africa included the taxation of land in its manifesto. In 1912 a Provincial Commission was set up by the Transvaal to investigate the franchising and rating of leasehold plots or stands in Johannesburg, where the stand holders were paying rates. After a stalemate situation, the late Justice Frank A.W. Lucas proposed that rates should be levied on the site value of land with the recommendation that, despite anything to the contrary in the titles, the freehold owner should not be allowed to recover the rates levied on him from the leaseholder. The Commission recommended this proposal.

About this time several Labour candidates, including Lucas, were elected to the Johannesburg Town Council. They were pledged to press for the rating of site values and the exemption of all improvements. A resolution to this effect was adopted and submitted to Province. However the Provincial Council consisted mainly of large landowners and disregarded the recommendation.

In 1914, following labour strike action; the Labour Party took control of Province with a majority of one. This allowed them to pass the necessary Transvaal Provincial Ordinance No 1 of 1916 that allowed for Site Value Rating and prevented Flat Rating, also known as Improved Value Rating, i.e. land and improvements at the same percentage. It was well understood that to collect rates from improvements discourages improving property. This ordinance, consolidated into Ordinance No 20 (1933) had the effect of ensuring a higher rate on land than on improvements, by at least one penny in the pound. This provision was removed in the new Ordinance No.11 of 1977 where the emphasis was still on rating of land but allows equal rating of improvements under certain conditions. However rating on improvements can never be higher than on land. The Transvaal Ordinance acted as a model for much of the country.

Some details of the above Ordinance were given in the first edition of “Land-Value Taxation Around the World” (1955), but warrant repeating in part. Site (land) value is defined as follows: “Site value of land” shall mean the capital sum which the land or interest in land might be expected to realize if offered for sale on such reasonable terms and conditions as a bone fide seller would require, assuming that the improvements, if any, thereon, or appertaining thereto, had not been made. The site value of land shall include any value due to any franchise, license, privilege or concession attaching to the site for the time being.” 4.

The earlier Transvaal Ordinance effectively prevented Flat Rating or total value rating. Johannesburg was the first to adopt SVR in 1918, followed by other municipalities. By 1955 there were 20 of the 60 urban municipalities on SVR and by 1979 all the major municipalities in the Transvaal had followed suite.

The other provinces had gradually followed the lead of the Transvaal. By 1979, 60 of the 125 largest municipalities in South Africa were on SVR, and by 1984, of the 112 cities with a total value of land and improvements of over R30 Million, 62 were on SVR. These accounted for 70% of total value of rating in RSA. By then only two of these largest cities were still on Flat Rating, namely Cape Town and Port Elizabeth. The others, on Composite Rating, namely a higher percentage on land than on improvements or commonly spoken of as two-rate system, all collect a larger percentage from land values than from improvements. It would be safe to say that less than 15% of total rates in RSA came from improvements at that stage. Towns and villages with a total value of less than R30 Million only accounted for 2.4% of the municipal revenue in RSA so could have little impact on conclusions given. A large percentage of the low value, low growth towns were on Flat Rating. 5. The rating of improvements partly accounts for the lack of investment and growth.

Two surveys on rating in South Africa, by this author, showed that the cities that collect rates on site value only have drawn twice the percentage capital investment compared to those which rate total value. The first survey covered a twenty-year period from 1959 to 1979 and the second a ten-year period from 1974 to 1984. The second survey was staggered by five years from the first to allow for differences in updating of valuation rolls. The Transvaal Ordinance calls for a three-year update whilst the Cape Province allows for ten-year updating. This staggering had little effect on the results. 5.

Rating Surveys

The findings of the two surveys are given in Chapter Fourteen of “That All May Live” and titled “Effects of Municipal Rating on Progress”. The results may be summarised as follows:

  1. In the period 1951 to 1984 the number of cities and towns on Flat Rating reduced from 187 to 61, whilst those on Site Value Rating increased from 36 to 98 in the same period. Some changed to and some from Composite Rating and a few were absorbed into larger towns in that period.
  2. In the first survey 1959 to 1979, the cities on Flat Rating, or Improved Value Rating, showed a total value increase of 536.5% over the twenty-year period whilst those, which were on Site Value Rating for the full period, showed an increase of 940.3%. Those which changed to SVR showed an even larger increase, namely 1013.2%
  3. The corresponding increases for the ten years of the second survey, 1974 to 1984, were 171% for Flat Rating, 328% for SVR and 357% for those changing to SVR.
  4. The growth is even more remarkable when backing out the land values and considering the growth in improvements only, or increase in capital investment, as a percentage over the ten-year period. This study was confined to the 48 largest cities each with a total value over R200 Million in 1984. Of these 33 were on SVR and showed an aggregate growth of 413% compared to 282% for the 13 on Composite Rating and 189% for the two remaining cities on Flat Rating. This is valid evidence to show that the rating of improvements provides a strong incentive for capital investment to go elsewhere, namely to those cities which collect their rates from site value only.
  5. A large number of small towns on Flat Rating in the Cape showed very little growth. This could be partly due to their geographic position and partly due to their system of rating all improvements.

It is interesting to note that the remaining two large cities on Flat Rating were Cape Town and Port Elizabeth, both major ports and tourist cities and one the legislative capital of South Africa. They should logically have kept pace with the average growth of major cities. However their percentage growth in all instances has been low compared to the average for RSA and particularly against those cities on SVR.

The other cities, which rated land at a higher percentage than improvements, showed growth in both total value and capital investment approximately in proportion to the incidence of rates on land vs. improvements. As a group their growth was between those on SVR and Flat Rating under all the different conditions considered. 7

Future studies could be complicated by a variety of changes that have and are taking place in RSA. To start with all the independent homelands have been reincorporated into the Republic of South Africa. This has made a big difference to government statistics and in particular to the total population. It has also allowed for major changes in the population distribution and increased city population beyond normal growth because of squatters.

The four former provinces together with the former independent Homelands have now been split into nine provinces with mainly new boundaries except for the Free State. In addition many predominantly lower priced and black squatter areas have been incorporated into former white cities and in many cases completely new boundaries have been established.

Around Cape Town many smaller municipal areas had also been incorporated into cities. This makes it almost impossible to compare pre 1996 to post 1996 municipal and city statistics and growth. It will take a considerable time to ascertain growth trends. An extra complication at the time was that the Cape Town valuation roll eventually reached sixteen years out of date and reflected values between some 5% and 50% of the actual market value.

A greater Cape Metropolitan Area was established and brought together thirty-nine former municipal areas with a population of approximately two and a half million people. This was subdivided into six Substructures under the Cape Metropolitan Council. These included a mixture of different percentages of composite rating and flat rating. This opened the opportunity for introducing SVR.

The South Peninsula Municipality, one of the six, appointed a special Rating Committee chaired by Councillor William Stibbe. Site Value Rating was recommended and approved by Council, to be introduced in July 1998. A new valuation roll was to be drawn up for SVR.

Councillor Stibbe was then nominated onto the Cape Metropolitan Council and they also agreed to follow suite with SVR. However three of the six municipalities disagreed. Three started preparing new valuation rolls suitable for SVR. These were almost completed when a group of citizens threatened legal action based on technicalities. This threat, coupled with a pre-knowledge that central government were preparing a Bill to enforce Improved Value Rating, put a stop to SVR

In other parts of the country there was the risk of some municipalities going the other way. City boundaries had been changed in many parts of RSA and city councils were made up of a totally new group of councillors, many of whom have never had occasion to pay rates nor consider their effects.

It can be shown that in the absence of a land tax, the present taxes contribute to unemployment and migration to squatter camps. Value Added Tax (VAT) can be shown to be a tax on labour that has to be met by additional wages, a cost to the employer. At each level of production, from primary industry to finished product and marketing, approximately half the value added is due to labour. So all materials and services purchased have many layers of labour included in their cost and each layer of labour has its cost increased by 14 % VAT. In effect the VAT imposes a tax of nearly 14% on the labour content of all material and services input. This is enough to put most semi marginal industries and a large number of farms out of business.

Further estimates show that the rental value of land in South Africa in 1986 was of the order of 64% of the 1986/87 Budget.6.

As most taxes eventually come out of rent, the economic rental value is what is left after the existent taxes have been extracted from the economy. Where the taxes applicable on marginal land are greater than the potential income from that land, either economic production ceases or the standard of living is drastically reduced.

If the sum of all existing taxes, at a particular point in time, are added to the total annual rent of a nation at that same point in time, the final quantity or sum would give a fair indication of the total rent available within that nation. For South Africa the 1986/87 figure would have been 164% of the budget. If government, in lieu of other taxes, collected 70% of this total natural rent, the sum would exceed the budget of that period. (164 x 70% = 114.8% of Budget)

The subject of land taxation is more in the public dialogue now than in many a decade and many people in government realize that something has to be done about distribution of land ownership and land tenure. It is unlikely that the subject will die a natural death too easily. It is only a pity that there is not a strong organization to lobby the cause of a land tax to replace all existing taxes.

The Republic of South Africa has been amongst the world leaders in collecting municipal or local government revenue from the capital value of land. Looking at the country as a whole, some 70% of city revenue was previously collected by Site Value Rating, (SVR), where there is no revenue collected from improvements. For the remainder, a larger portion came from land values than from improvements, with only two major cities were collecting an equal rate on both land and improvements, i.e. Flat Rating.

For the most part there is a distinction between rates and services. Services are normally charged as close as possible to cost and capital replacement / amortization, and contribute little towards general municipal revenue or expenditure. However there has been a major upset to this principle in recent years because of political agitation and the growth of a culture of non-payment. This reached serious proportions to the extent that the central power supply authority, Eskom, threatening to cut off power to large areas. Many local authorities are effectively bankrupt and this could affect current thinking on municipal revenue systems.

The struggle for land ownership and the right to land tenure is reaching serious proportions. In the past this was partly hidden by the controls of apartheid. With the removal of Influx Control, squatter camps started growing around many towns and villages as well as major cities throughout South Africa. The Independent Homelands had been heavily subsidised by the Republic of South Africa and were thus able to work on a different tax structure to that in the Republic of South Africa. This was a deliberate attempt to encourage the growth of industry and other employment opportunities in areas which would have been close to marginal because of their adverse location relative to markets, and their lack of infrastructure. In this respect, the Apartheid government did the right thing but for the wrong reason. The present government have unwittingly done the wrong thing.

When the above areas came back into the Republic in 1993, these subsidies were reduced or removed and the former Independent Homelands came under the Republic’s tax structure. This had the immediate effect of shifting the economic margin of production. Once viable industries and business undertakings were rendered unprofitable. The increase in taxation had placed them beyond the new economic margin.

A typical case is a border industrial area near East London, which came under the Ciskei tax structure. Before 1994 it had approximately thirty thriving industries employing thousands of local blacks. A few years later only about eight of these industries were still operating, the others were closed down by the new taxes. Thousands of labourers became unemployed with no alternative employment in the area. Many other areas have suffered a similar tragedy. The Department of Finance and their Tax Consultants refuse to address this problem. In desperation the unemployed continue to migrate and settle in squatter camps around the cities and have added an unprecedented economic burden to those cities. In spite of the current housing policy there are some five million or more squatters in South Africa.

There has been a strong move towards redistribution of land and restitution of land rights taken away from large numbers of people. This was done during the days of the apartheid policy of moving blacks from white areas to black homelands. Much of this is being reversed by court decisions and the Ministry of Land Affairs is working towards introducing a land tax in rural areas. This is being opposed by all farming organizations.

The Minister at the time was aware that a land tax should apply to all land including urban land, and that it should be offset by a reduction in VAT or other taxes which impose a burden at the margin of production. However his portfolio only covered rural land and he had no say over urban or mining land. The idea of a land tax was therefore referred back to the Katz Tax Commission.

This Commission was appointed by Government on the 22nd June 1994 to investigate and report on the overall tax structure of RSA, together with recommendations. In their Third Interim Report, dated 28 November 1995, under the heading Land Tax, page 29, the following appears: 4.2.3 In the light of the foregoing considerations, the Commission does not recommend a national land tax in the short to medium term.

4.2.4 however, the commission believes that there is sufficient evidence to justify the possible implementation of a rural land tax at a local government level.

The Tax Commission subsequently recommended an additional tax of 2% on all rural land and improvements without any talk of offsetting it against other existing taxes. Their tentative views include the following: (October 1996)

  • The market value of land and improvements should form the tax base.
  • Valuations should take place at least every five years.
  • The owner of the land should be liable for the tax.
  • The tax rate should not exceed two percent a year.
  • Relief through the use of rebates and referrals should be kept to a minimum.
  • The tax should be levied annually but could be collected at shorter intervals.

The above is not in line with recommendations made on behalf of the International Union for Land Value Taxation and Free Trade in the following respect:

  1. The tax should be on land only and not on improvements.
  2. The tax should be on all land including urban land.
  3. The tax should replace existing taxes, which contribute towards unemployment because of their effect at the margin of production.
  4. There should not be a limit of two percent.

A base line rebate should be allowed provided it is a fixed monetary amount for all owners irrespective of the value of their property. The amount of this rebate should be pitched at a level that will exempt the large number of sub-economic houses. This will simplify both the preparation of the valuation rolls and the administration cost of collecting small amounts at the lower end of the scale. The poor will be given some relief, the tax rate will be slightly increased to meet the same budget requirements and the wealthy will pay a little extra.

Act of Parliament

In 2003 a Portfolio Committee in Parliament spent many months debating the proposed Property Rating Bill. A substantial amount of evidence was provided by various Georgist organizations in favour of SVR and nothing concrete given against. However there was a determination to impose rates on improvements. Even appropriate definitions had been withdrawn from the final Drafts of the Bill; without which there could be no inclusion of other forms of rating

Parliament passed the new Act in 2004 that made Improved Value Rating compulsory. Many municipalities are still in the process of implementing this Act.



South Africa has enjoyed a long history of successful application of Land Value Taxation. First there was an annual quitrent, then a duty to the state, then municipal rates. Most municipalities have had years of experience at drawing up valuation rolls based on separate land and improvement values.

All land now comes under the jurisdiction of some municipality. This includes agricultural land, government owned land and tribal land. Many smaller municipalities have been incorporated into larger ones and the total number reduced. Thus it would be relatively easy to incorporate LVT for central government into the local government rating system, covering the entire country.

South Africa has a strong and stable government in spite of temporary weaknesses in many departments. There was a peaceful transition from an oppressive regime to a freely elected government with a written Constitution and a Bill of Rights. When convinced of the value of LVT the government would have the strength to introduce it.

The country is blessed with vast mineral wealth and natural resources, a good climate, many tourist attractions, an abundance of fishing rights and busy shipping routs, to name but a few. When these are all taken into account as being included in the definition of land and subject to some form of land tax, RSA is potentially a very rich country. It is the constitutional duty of government to create conditions for free enterprise to flourish and then collect the resultant rent. There will be enough to meet all reasonable government expenses at all levels, to finance new and necessary infrastructure, to build up a reserve for unforeseen disasters and to pay a fair Basic Income Grant or Citizens Dividend to all citizens.


With the change of government there was naturally an attempt to level the playing fields to make up for the years when the masses were underprivileged. This resulted in qualified and experienced people being given early retirement or a retrenchment package. The outcome has been a serious shortage of both skills and qualified trainers. Employment quotas designed to equalise employment opportunities across all racial groups have prevented employment of the most experienced people for particular jobs with resultant inefficiency. This has also caused qualified professionals to leave the country; further aggravating the situation. Many who understood the advantages of SVR were lost from the system.

During presentations and discussion on the Property Rates Bill in 2003 there was very little support from municipalities for SVR. The new municipal management did not understand.

Through lack of skill, training and experience, many in government are diffident about making decisions and the whole process of transformation has been slowed down. Committees, conferences and workshops are ever increasing in number but little comes of them. Even then, decisions are often short sighted and suffer from unforeseen results.

Apart from under staffing and lack of skills in many departments, there is a lack of communication between different departments. Heads of departments seem scared of over-stepping their job mandate and interfering with other departments.

There seems to be a dearth of vision of the overall requirements of both the economy and society.

The policy of Black Economic Empowerment together with an extreme shortage of qualifications and skills led to head hunting at highly inflated employment packages in an attempt to meet the imposed quotas. As a result, large parts of the improvements that have taken place have been channelled to a small percentage of newly wealthy and powerful people, some of whom have made fortunes in a very short time.

By contrast there is extreme poverty and unemployment. The official figure for unemployment is based on the number currently officially looking for employment. It does not include those who have given up or are not registered. Unofficial figures of unemployment are approximately 40%. In some regions it is estimated to be in the vicinity of 80%, accompanied by grinding poverty. This has become increasingly worse since the end of Apartheid.

Under Apartheid there was an attempt to provide employment near to, and subsequently within, the Bantustans. When some became independent homelands they were subsidised and had their own local tax regimes, different from that in RSA. Together with the Pass Laws this encouraged workers to stay away from the white cities. After 1994 these states were re-incorporated into RSA and came under RSA tax laws. Large numbers of industries closed down as they became unprofitable. Unemployment soared and workers flooded to the cities and towns. If the present taxes had been replaced by LVT this would not have happened. The previous government did the right thing but for the wrong reason. The present government have done the wrong thing through lack of understanding.


The background to the new South Africa presents wonderful opportunities to establish a society based on justice and equity for all citizens.

The Preamble to The Constitution of the Republic of South Africa, 1996, states that:

“We the people of South Africa . . . . . Believe that South Africa belongs to all who live in it, united in our diversity.”

The Freedom Charter (1955) of the African National Congress (ANC) is what the ruling party fought for, and guided the transition of government and the drafting of the Constitution. The Bill of Rights is in turn closely aligned to the United Nations Charter of Human Rights In it are stated the following:

We, the people of South Africa, declare for all our country and the world to know: That South Africa belongs to all who live in it. The people shall share in the country’s wealth. The land shall be shared among those who work it. Etc.

Considering the above positive start, it would have been logical for the new government, with an absolute majority in parliament, to change the tax system so as to encourage an economically driven distribution of both land and opportunity to the people in general. This could be done whilst still honouring the concept of ‘Willing Buyer / Willing Seller’

Many of the existing problems could be significantly reduced by a change in the tax structure. It is believed that there is nothing in legislation to prevent the necessary changes. Marginally productive land, where the profits, after paying wages, interest on capital and the cost of materials and services, leave a return of less than the imposed taxes, will eventually become un-productive and cease employing labour. If these deadweight taxes were abolished and replaced by LVT, this type of sub-marginal land would be relieved of taxes and pay very little if anything in land rent. The land would have very little market value and would once again become productive.

In other words, the new RSA constitution could be realised via the un-taxing of work and the collection of land rent for the benefit of all via LVT.

A national land register should be seen as a prerequisite. This could be easily compiled with the use of modern equipment and incorporation of all municipal updated valuation rolls.


Over the years landlords have been able to evade their duties relating to the ownership of valuable land. Traditionally landlords collected the rent of land and used a portion thereof to support the king’s court. Land lording was not originally a problem in RSA but ownership of land demanded either rent or the duty of defending the state and keeping the peace. This has given way to the modern tax system where labour and the products of labour have to carry the tax burden.

Existing taxes are a direct cause of unemployment. Near-marginal land is only capable of producing a slight profit that is not able to carry any form of taxation and is therefore rendered economically unproductive by taxes. This puts both land and labour out of production and stops the flow of revenue. Secondly, these taxes often increase the cost of labour to the extent that the overall cost of employing is less than the market return. Marginal labour becomes unemployed even on prime land.

As previously stated, the new government, through lack of understanding, destroyed the municipal Sit Value Rating system that covered 70% of rating in the country and was regarded as one of the best rating systems in the world. This could have formed the foundation of a tax system for central government. The result has been to encourage the withholding of vacant and under-utilised land from the market and to work counter productive to government’s plans for land distribution and increased employment.

In the case of Cape Town, 10% of land is shown as vacant and the owners have been given a gift of R130 million per annum compared to what they would have paid under SVR. This does not take into account the loss from underdeveloped land.

There has been a lot of talk about an agricultural land tax but this would be limiting and applied as an additional tax. Naturally the economically threatened farmers are up in arms against the idea. This would further damage the economy.

There has been talk of abandoning the system of ‘Willing Buyer / Willing Seller’ because there is a demand side market with government as the main and committed buyer. As a result speculative prices of land are increased when government wishes to buy. They have not yet realised that a change in taxation can also bring about a change to a supply driven market in land.

Is anyone in government capable of both understanding the mistake and correcting it? Will they realise the importance of bringing about a complete change in the tax structure and have the power to carry it through?

It is feared that, without the justice, equity and efficiency of Land Value Taxation, many of the economic and social problems in RSA will not be solved nor the dignity of the people restored. The wealth gap and poverty will continue to increase.


1. T R H Davenport and K S Hunt, The Right to the Land, (Cape Town, David Philip 1974) p.3

2. Ibid. p. 6

3. Frank A W Lucas, Justice and Social Reform, (London, Land and Liberty)

4. Arthur W. Madsen, Land Value Taxation Around the World, Chapter; The Union of South Africa. (New York, Robert Schalkenbach Foundation, 1955) p. 41.

5. Godfrey Dunkley, That All May Live, (Johannesburg, A Whyte 1990) p.119 to 127.

6. Godfrey Dunkley, Land Tenure: A Time Bomb Ticking in South Africa, (Cape Town, Dunkley, (1991) p.15.

7. Some of the above information previously published in ‘Land Value Taxation Around the World, Third Edition 2000’, The American Journal of Economics and Sociology. Edited by Robert V Andelson

South Korea

South Korea SWOT Analysis

By Jeffrey J. Smith


From as early as 50 BC, Koreans have had the duty of paying for land to their government, a rent to their king. Through the millennia, the land dues went through many transformations yet nevertheless persisted until the 19th century. Then the Japanese colonized Korea and created a cadastre that more stringently identified landowners and levied upon them a land-value tax separately from taxes on property improvements.

Modern South Korea has several land taxes. The central government – which appointed all local administrators until 1995 – taxes the income stream from a property and the gains from a sale while the local government taxes registering and holding land. The taxes on land come due in the spring, on buildings in the fall. How much these property taxes contribute to the operation of local government varies widely from 30% of budget in some jurisdictions to 80% in others.

The wide range depends on two factors, one political and one economic. The economic one is simply how much land rent is available, which typically is more in urban jurisdictions and less in rural ones. The political factor is the relationship between the central government and the particular jurisdiction, how much land-based revenue the central government returns to the locality, which can be a factor of political favoritism.

We do not have any more recent information to be able to tell if localities have won greater autonomy or if either government – local or central – has increased or decreased it recovery of ground rent. We do not know how much revenue these property taxes raise compared to other taxes. Nor do we know if the taxes on land raise more revenue than the ones on buildings. Contemporary news reports tell us that there have been proposals to tax land and much discussion and dissent, which is typical when land rent lines the pockets of well-connected speculators.

Due to economic growth and land speculation, the value of Korea’s land by 1990 was nine times its GDP, a much higher ratio than experienced by other countries, including Japan. In 1989, the appreciation in the value of locations was 35% greater than the earnings of all urban workers, and most of that land value increase escaped taxation. Only 5% of the population owned 65.2% of the nation’s best land, which is in short supply as South Korea is very mountainous, like Taiwan, so most acreage is desolate.

As in many places, especially those where location value rises rapidly, for years the government did not keep assessments current. Both speculators, who tend to have more political power, and normal landowners, who tend to be very numerous, complained about higher taxes on land. Local governments did not increase land rent recovery since they were able to obtain revenue from other taxes and from the central government.

Failure to reassess land as it grows in value of course benefits most those owners of land growing fastest in value. The reform of 1989 did lead to assessments that reflected actual market value but the government vitiated that by later further lowering tax rates.

In response to the high cost of land and to the potential of a recession once the bubble bursts, the government tried to discourage speculation and land hoarding. It reinforced the registration of land titles, reformed land assessment, limited the amount of land ownable per household, and levied taxes on landholding, land development, and on land-value increments. These extra taxes were tantamount to creating higher rates for larger holdings and more valuable holdings. The various rates ranged from one tenth of a percent to five percent, presumably of the land’s selling price or capital value. The extra complexity of various rates for various uses by various owners does come with a greater administrative cost.

While government assessors did try to calculate true market value of land, the official taxable values of sites are only 15%-20% of known market price. And since the rates of most taxes on land are low, the government’s light collection of land rent did little to modify landowners’ behavior. They still speculate, amass acreage, and withhold prime sites.

The one land tax that was an exception to the pattern of leaving rates low was the one on gains from sales of idle land which came into effect when a parcel was sold; in fast growing regions, its rate was set at 50%. Since this steep rate applied only to idle land, some owners built cheap and ugly structures to avoid having their land classified as “idle”. Thus when owners sold their no longer idle land, they could still reap maximal profit. The waste of labor and materials exacerbated a shortfall of both inputs needed for construction of genuinely desired buildings, which harmed society at large.

Other landowners paid the tax on gains but had to downsize their holdings and sell off their excess in order to be able to make the tax payment. While the tax worked for society and buyers – it broke up large holdings – those owners who had to sell complained that the tax violated the principle of ability to pay. In 1995 in the Korean constitutional court they won a ruling against the tax which now is little used.

Registration of land may be unique in Korea. There the government keeps two official records for each parcel. One is economic, detailing the value of the plot, and the other is political, detailing the rights and privileges attached to the lot.

In 1997, Korea was visited by financial panic. Local banks had borrowed heavily from global lenders to gamble on real estate. When new buyers of properties could not be found and short-term loans became due, liquidity dried up. The process was repeated around the globe, culminating in many currencies of many nations being devalued and their governments taking on more debt from the IMF. To reverse the slide in land prices, the Korean government targeted and reversed many of its 1989 reforms, however mild and ineffectual they may have been. It opened tax loopholes, lifted the limit on acreage holding, and allowed foreigners to own real estate directly. The greater leeway made it easier to trade in mortgages and attracted fresh liquidity.

As a result, the new anything-goes atmosphere not only enabled a new round of speculation in real estate but also further integrated the real estate and finance sectors, and the local and global economies. As long as land rent is left out of the public treasury and kept as an object of speculation, such new integration generates risk for the Korean economy. More credit is created, which is inflationary. And it is channeled to speculators, leaving less for actual production. Further, outside investors with large pools of cash will bid up local real estate values then withdraw their investments when land prices fall, leaving Korean borrowers desperate for liquidity.


The major strength of the Korean example is it showed that both the public and government can become aware of the harmful consequences of rampant speculation in land and become moved to try to correct the situation, which is what they did with the reforms of 1989.

Additionally, despite whatever shortcomings it may have had, the 1989 package was able to direct the bureaucracy to reassess all the land of the entire nation of South Korea.

Of course, passage and implementation of the reform was made easier by the fact that Korea had a tradition of paying taxes on land and that speculation had become so rampant that it was visible to even the casual observer. Nevertheless, since speculation is universal and rapid rises in well-situated urban land is a worldwide phenomenon, it should be possible to make the connection between the problem of unaffordable land and the solution of public recovery of land rent.


    The example of South Korea has several weaknesses:
  • Until the 1989 reform, neither the central nor the local government kept assessments of site values current. Local government could afford to be indifferent since most of their funding came from the central government, revenue raised by taxes on other sources than land. When the central government finally did reassess land, it "paid for" the higher assessments by lowering the rates of one of their land taxes, vitiating the potential for good from the higher assessments.

  • The central government could at any time create a tax loophole that could upset the plans of local government.
  • Except for the tax on the increment of land value, both tax rates and land assessments were too low to motivate landowners to begin to use their land more efficiently. Owners would still speculate, amass acreage, and withhold prime sites. Because there was little socially-beneficial response by owners, there is no economic data to show the before-and-after effects of this potentially powerful tool for countering speculation and promoting efficient land use.

  • The new tax reform of 1989 was complex in having several rates which is more difficult and hence more costly to administer.

  • The new tax reform of 1989, while re-organizing the land tax code and raising some rates, did not at the same time lower any other taxes, which would have made the reform more acceptable.

  • The proponents of the tax reform of 1989 justified its passage on the grounds as an antidote to speculation, not as an instrument of justice or a way to raise revenue or motivate efficient land use. Then later when many speculators went bust in 1997, no antidote to land speculation was any longer needed, so opponents of public recovery of ground rent were able to sweep away the justification for the land tax and reverse the reform package itself.

  • The unique if not odd Korean system of two official books of land assessments is not only complex but also incomplete, out-of-date, and open to manipulation.

  • The exemption from taxation provided to idle land shows the risk inherent in all exemptions. It motivated wasteful behavior on the part of those who took advantage of it and bitterness from those who did or could not take advantage of it. A better way to take any sting out of a tax on land would not be to exempt any owners but to return some portion of the revenue raised from ground rent as a dividend to area residents. Receiving a dividend, owners could choose to either use the funds to pay the tax and not modify their use of land or modify their use, thereby saving money, plus have the dividend as a bonus. To maximize profit - which, after all, is the point of much ownership of land - most owners would modify their use of land and put it to higher and better use or sell to someone else who would.


Because Korea has a tradition of paying land dues and land taxes, and because a reform package that included taxes on land was possible as recently as two decades ago, the political climate continues to leave the possibility open of reforming land taxes again. Indeed, there is a movement in South Korea to do just that, and those activists have been able to gain the ear of certain high-ranking government officials on occasion.

Because South Korea is one of the Asian Tigers and those nations that developed so rapidly are admired worldwide, any land reform that Korea can pass should be exportable as a model to other nations aspiring to develop, too.

Because many Koreans try to get rich in real estate, and many normal owners have most of their savings in their property, the national mindset is to derive an income stream from land. As in most countries, they hope to realize that income individually. However, Koreans do have a stronger national identity with the land of their country and a tradition of paying land dues. Therefore, the proposal of a rent dividend to Koreans might be able to find some support and make land reform – accurate assessments, higher rates – far more palatable to Korean voters.

Note that the argument that overturned the one land tax with an effective rate was the ability to pay argument. However, if citizens receive a dividend from recovered rents, then they are effectively guaranteed a perpetual ability to pay the tax upon at least the land they own for living on. Receiving the dividend check each month or each year, nor do they have to wait to sell their family land to derive an income. Plus, they can use the citizens’ dividend to invest in other enterprises, if they so desire, that are not purely speculative but produce real value in terms of new goods and services, which spreads prosperity to even more Koreans.


The South Korean model shows how a crash in inflated real estate values can be used as an excuse to overturn reform, even though doing so actually makes the next crash more likely and more devastating. The only antidote seems to be to, yes, allow the people to profit from land but not in a competitive, counterproductive, speculative fashion of individual, dog-eat-dog efforts to grab all the land rent one can for oneself but to profit together, equally, by paying land taxes or land dues into the public treasury and getting rent dividends or a "Citizens' Dividend" back.

Since the South Korean government has already backed away from its own land reform in the wake to their 1997 financial crisis, the worst that could happen already has happened. After millennia of paying land dues, to completely repeal land taxes does not seem like a credible threat.

The other main threat – turning Korean real estate into a commodity, an object of speculation in the international market via the bundling of mortgages – that, too, has already occurred.

The biggest threat may the average landowner who has no other equity but that in his land. While he torn between levying an antidote to speculation and fulfilling traditional obligations on one hand, on the other hand is the model of what most of the rest of the world is doing and that is playing a game of musical chairs with land, driving a huge gap between rich and poor, putting economies on a roller coaster ride of boom and bust. When one looks at the big picture and the threats from individuating the stream of rent for land by hoarding and by leverage (indebted borrowing), then the wholesome alternative of recovering natural rents – while not taxing the goods and services that people do produce – is clearly the way to go.

This SWOT analysis was written by Jeffery Smith, founder of the Geonomics Society, for use by the UN Habitat Global Land Tool Network’s program on land rights and land value capture. In addition to the references contained within this report, information was gleaned from the South Korea section of the book Land Value Taxation Around the World, an anthology compiled by Robert Andelson and available from the Robert Schalkenbach Foundation.

Taiwan (Republic of China)

Land taxation in Taiwan (Republic of China)

by Fred Foldvary
Dept. Of Economics, Santa Clara University



Land taxes in China go back to ancient times, when farmers paid one-eighth of their crop to the government. A detailed land survey was conducted in Taiwan in the last years of the Chinese empire, from 1898 to 1905. A series of Land Report Books were compiled, and plots of land were divided into sections called “tuan” (VanderMeer and VanderMeer, 1968).

Sun Yat-sen, founder of the Chinese republic, sought to transform the ancient Chinese land levy into modern form based on the thought of Henry George. Dr. Sun's ideology was called the “Three Principles of the People.” His land and taxation philosophy were also influenced by experience of the German colony of Kiaochow, which enacted a single tax on land value, since the governor of Kiaochow was also influenced by Henry George (Foldvary, 1998).

Taiwan was returned to China in 1946, and the Nationalist Chinese tax system was applied to Taiwan. After the defeat of the Nationalist party, Sun’s successor, Chiang Kaishek, set up the Republic of China on Taiwan in 1949.

The tax and land reform movements in Taiwan began in 1951. The government of Taiwan enacted the Statute for the Equalization of Urban Land Rights in 1954. The Statute was intended to achieve four objectives: (1) fair assessment of land value; (2) taxation according to declared value; (3) government optional purchase at declared value; and (4) public enjoyment of future land value increment (Lam, 2000).

Later, “Taiwan's President, Lee Teng-hui, held a doctorate in Agricultural Economics. Taiwan's story was documented in 1989 by the former Minister of Finance and Economics, Kwoh-ting Li, in The Economic Transformation of Taiwan. In this book, the role of land policies is described as one of many measures adopted as part of a commitment to economic development” (Dodson, 2006).

Tax policy

There is no unified tax code in Taiwan. Each tax is based upon separate legislation, with its own tax code. There are four categories of taxes into which a total of twenty-three revenue raising categories exist: National taxes (individual income tax, profit-seeking enterprise income tax, estate and gift tax, customs duties, and commodity tax), provincial and city taxes (the business tax, stamp tax and vehicle license tax), prefectural and municipal taxes (the land tax, agricultural land tax, land value increment tax, house tax, deed tax and amusement tax), and “monopoly revenues” (on commodities have been monopolized by the central government).

The following types of income are not included as taxable for the income tax: gains from land sales, gains from sale of securities, and appreciation upon reappraisal of assets (Lex Mundi Deskbook, 2003). However, there is a specific land-value increment tax, described below.

The central government’s taxing authority is the Ministry of Finance, which has administrative divisions, including the customs authorities and the National Tax Administration for income and business taxes. The municipal governments of Taipei and Kaohsiung and the prefecture governments each have local tax authority for the land tax, house tax, amusement tax and deed tax.

The agricultural land tax was assessed on farmland based on the amount of the harvested crops, so it was more a harvest tax than a land tax. It could be paid either in kind or with cash. The agricultural land tax was suspended in 1987 “to ease the tax burden on farmers” (Helplinelaw, 2005).

The house tax, enacted by the House Tax Act of 1967, is levied according to the value of the house, assessed by a local real estate assessment committee. The values must be publicly announced by the committee. For residential use, the tax rate should be higher than 1.38 percent and lower than 2.0 percent of the current value. The rate for owner-occupied houses should not exceed 1.38 percent. For commercial use, the rate is from 3.0 to 5.0 percent. For non-profit use such as hospital or civic organizations, the rate is 1.5 to 2.5 percent (Lam, 2000).

In 1977, the Land Tax Law was passed to provide stronger enforcement power for land-related taxes. Two major land-related taxes were prescribed: land-value tax and land-value increment tax. The land-value tax was developed to expand the local government revenue base. The land-value increment tax was designed to ensure the public benefit from future land value increments. Both the land-value tax land-value increment taxes are handled by local jurisdictions.

In 1981, a basic law governing the distribution of Taiwan’s government revenues was enacted, the Law on the Distribution of Financial Revenues and Expenditures (Lipsher). The government annually decides the proportion of tax revenues to be raised by each government authority

The land- and building-related taxes in Taiwan have included the land-value tax, agricultural land tax, land-value increment tax, deed tax, house tax, and estate and gift tax. The deed tax accounted for 8.5 percent of prefectural and municipal revenues in 1995 and was relatively less significant in the revenue system in Taiwan.

In 1995, national taxes accounted for 53.8 percent of total national revenues, while provincial and city taxes accounted for 20.4 percent; and prefectural and municipal taxes accounted for 20.9 percent. In that year, 75.3 percent of total prefectural and municipal tax revenues came from land taxes; the land-value tax accounted for 14.9 percent, and the land-value increment tax accounted for 60.4 percent. The peak of land-value increment tax collection was in 1992 when the land-value increment tax accounted for 71 percent of total local revenues (Lam, 2000)

The land-value tax is levied according to the Official Declared Value (ODV) of non-farm land. The ODV is assessed once every three years by municipalities. Market information is used in the assessment. The Ministry of Interior provides technical assistance to local assessment. A Land Value Assessment Commission is established by each local municipality with the responsibility of evaluating official assessed value. After the approval from the Commission, the assessed value is announced as ODV.

Taiwan’s land-value taxation is based on progressive tax rates of one percent, 1.5 percent, 2.5 percent, 3.5 percent, 4.5 percent, and 5.5 percent. A Starting Accumulative Value or SAV, is assigned as the starting base for taxation. For an ODV less than the SAV, the tax rate is one percent. For the portion exceeding the SAV, but less than 500 percent, the tax rate is 1.5 percent. For the portion exceeding the SAV, but less than 1,000 percent, the tax rate is 2.5 percent. For the portion exceeding the SAV, but less than 1,500 percent, the tax rate is 3.5 percent. For the portion exceeding the SAV, but less than 2,000 percent, the tax rate is 4.5 percent. Value at higher levels is taxed at 5.5 percent.

The land-value increment tax is levied on realized gains from land transactions, similar to a "capital gains" tax. Its rate ranges from 40 to 60 percent. The intent is to curb land speculation and limit the concentration of land ownership. The gains from land sales in Taiwan have special implications. In Dr. Sun's ideology, it is important that "the increment of land price should belong to the society rather than the landlord." He believed that the increase of land-value is attributable to social development rather than work from the landlord or investors. Dr. Sun agreed with Henry George that the profit from land should be returned to the society. The land-value increment tax became a powerful policy tool to regulate the equity of income distribution and to control land speculation. The seller must pay the land-value increment tax before the land transaction is completed.

When the increment is not in excess of 100 percent, the tax rate is 40 percent. If the increment is between 100 to 200 percent, the tax rate is 50 percent. If the increment reaches more than 200 percent, the tax rate becomes 60 percent.

Inherited land, publicly-owned land sold or donated, and private land given as a gift are exempt from the land value increment tax. To “promote economic development,” the government reduced the land value increment tax by 50% for three years tarting on February 1, 2002 (Helplinelaw, 2005).


Taiwan’s land taxes were a major cause of its economic success. In the 1950s and 1960s, Taiwan was transformed from an impoverished agricultural backwater to a thriving industrial state with one of the world's strongest economies. If the tax is applied to land value rather than the value of the harvest, then the land-value tax is not a burden on farmers, since it reduces the price of farmland, and does not add to the market rent of land.

A major strength of Taiwan's property tax system is its constitutionality. The implementation of the equalization of land rights is stipulated in the Constitution, rather than merely in laws that can be more easily changed or eliminated.

Another strength is the decentralized implementation of the land tax. Land taxation is a local government function, but with its objectives stipulated by the national Constitution.

The most important strength is that the stated purpose of the land taxes is not just public revenue, but also to obtain an equal benefit from the land. The main objective of the equalization of land rights is to redistribute profits from land through the measures of land-value assessment, declared land-value, land-value taxation, and land-value increment taxation. The land reform and land tax has achieved a highly equal distribution of wealth, without much welfare-state redistribution.

Another strength is that the land taxes of Taiwan have obtained a significant portion of the country’s government revenues.


The administrative structure to implement real property taxation program in Taiwan has evolved into a very complicated and inefficient bureaucracy. The bureaucracy through which central government controls local revenues and expenditures gives little incentive for local officials to seriously monitor the effectiveness of the property taxation system. Although property tax revenues continue to grow and are often seen as a healthy revenue source, the reality is that a significant portion of gains from land sales escape through regulatory loopholes. For example, land transactions within the annual assessment period are not subject to land-value increment tax even if sales value has increased significantly within the year. The objectives have been difficult to fulfill due to the complexity of regulatory, political, and social conflicts (Lam, 2000).

Another weakness is that the Taiwanese assessment practice was never able to reflect the real market values of land, and consequently never able to measure the real gains from transactions. The publicly declared land values are approximately 50 percent of market values. If the local overnment does not reassess land value, then the ODPV will not be changed. In this case, no land-value increment taxation is collected.

The weakness of the agricultural land tax was to base it on the harvest, rather than on the market rent or value of farmland.

The reduction of the land increment tax in 2002 shows a weakness in the understanding of the purpose and economics of taxing land, and also may be a symptom of the political influence of landowners.


The weaknesses of Taiwan’s land taxes can be overcome with governmental reforms. The system should be simplified to have one tax on all land values rather than also having a land-value increment tax, a house tax, and others. The tax rate should be increased to at least 80 percent of the land value.

Some of the revenue should be distributed as a people’s dividend, so that there is public pressure to have the full amounts assessed and collected. Voters should be able to recall officials who are not effective in collecting the full amounts.

The political landscape changed in 2000, when the ruling Kuomintang party was defeated in the national election, marking its first time out of power since Chiang and his forces moved to Taiwan from the Mainland. Greater democracy may provide an opportunity to refresh the ideals of Sun Yat-sen.


Landowners generally seek to have a lower tax on their land value and rent so that their properties will appreciate in land value. This includes government-owned land, as government agencies and politicians who control land are interested in using the gains from land for their own agencies rather than for the public good. The Taiwanese public is not sufficiently educated or motivated to seek to prevent land speculation. The interests of landowners and the ignorance of the public threaten to reduce land-value taxation in spite of its constitutional basis.


Dodson, Edward J. 2006. “Taiwan: A Georgist Success Story?” Reprinted from Equal Rights, Vol.35, No.3 (Spring)

Foldvary, Fred. 1998. Kiaochow's 100th Anniversary.

Helplinelaw. 2005. http://www.helplinelaw.com/law/taiwan/taxation/taxation.php

Jenkins Glenn P., Chun-Yan Kuo, and Keh-Nan Sun. 2003. “Taxation and Economic Development in Taiwan.” American Journal of Economics and Sociology 62 (4), 734–735.

Jenkins, Glenn P., Chun-Yan Kuo, and Keh-Nan Sun. 2003. Taxation and Economic Development in Taiwan (Harvard Studies in International Development).

Lam, Alven H.S. 2000, “Republic of China - Taiwan.” Land-Value Taxation Around the World, 3rd ed, American Journal of Economics and Sociology 59,5 (Supplement).

Lex Mundi Deskbook. 2003. “Taiwan.”

Lipsher Accountancy Corporation. 2007. Taiwan.

Mabel K. W. Li 1958. “The Tax System of Taiwan.” The Journal of Finance, Vol. 13, No. 1 (March), pp. 111-113

Canute VanderMeer and Paul VanderMeer. 1968. “Land Property Data on Taiwan.” The Journal of Asian Studies Vol. 28, No. 1 (November), pp. 144-150


By Gordon Abiama

Tanzania is an East African country with a surface area of 94.3 million hectares (ha) of which 22 million ha (23%) is allocated to reserves which includes National Parks (4.2 million ha) Game Reserves (7.7 million ha) and Forest Reserves (10.1 million ha). Tanzania has the largest share of land resources allocated as reserves of any country in sub-Saharan Africa.

The gross area cultivated/planted annually is only about 5.1 million ha which is only about 5% of surface area Tanzania. The other arable land but not cultivated is 10 million ha, much of it used as pasture. Within the reserves, there is an additional 4 million ha suitable for cultivation.

Agriculture in Tanzania is dominated by small holder farmers (peasants) cultivating an average farm sizes of between 0.9 ha and 3.0 ha each. Taxes from these farmers contribute very little to the total annual revenue.

Tanzania’s first comprehensive tax legislation came at the start of the Second World War which defined real property income as income from dividends or interest, royalty or rent. It is nevertheless remarkable to note that prior to 1958, the Act imposed a tax rent minus any expenses incurred in the production of the income. The law has undergone several amendments concerning taxation of land rents.

Tanzania in the 1920s had a very high standard of surveying and registration thereby making statutory taxation of property rates possible. Between 1959 and 1964, records show that average land rent contributed 4.1% to Tanzania’s GDP. This gain was however reversed when Tanzania adopted Socialism in 1967 which brought the nationalization of all private property. Section 8 of the Act under which rents were brought into the concept of income was abandoned.

In 1955, site-value rates were introduced in Dares-salaam and the eleven autonomous urban councils while rating in other parts of the country was conducted by government appointed councils. Each of these autonomous councils including Dares-salaam city council was required to set up its own rate applicable to the unimproved land values only but subject to approval by the minister of the local government. The rates ranged from 2.5% to 3.5% while certified government valuers were to undertake revaluations every five years.


Tanzania has had experiences that paralled the introduction of the Hut and Poll taxes in other East African colonies from the start of the 20th century. Since Tanzania attained its political independence in 1961, it has been realised that there was a need to develop a coherent and comprehensive land policy that would secure land tenure and enable proper management and alienation of land in urban and rural areas and provide a clear position on customary land tenure in the light of profound economic and social reforms.

Thus in May 2001, the laws passed by parliament in 1999 became operational. One of the fundamental principles of those land laws is, “ to ensure that land is used productively and that any such use complies with the principles of sustainable development”.

What better and more efficient way to ensure the above goal than through the operation of a land value taxation system where a landholder who holds down land will be forced to give it up for productive use when he realises the economic waste of paying a land value tax on a land he was not willing to put into productive use.


The introduction of socialism in Tanzania which redefined land tenure and property relations only created a complicated land administration system where all land was nationalized and presumed leased at full economic rent. When the land laws were reviewed in 1974 it resulted in throwing away the baby with the bath water. This meant that taxation based on land values was stopped.

In fact, the direct taxation of land values in East Africa has a direct nexus with large scale alienation of land in the settler economy. Due to strong opposition from the settlers, the Crown Bill had the provision for land taxation deleted.

Because there was no evidence of land transaction at market rates, chronic market distortion occurred as government valuers resorted to using proxy measures that needed considerable adjustment to arrive at market rates.

In order to improve on public finance, property tax is viewed as being potentially the most lucrative source of tax revenue. However, Tanzania is hampered by issues pertaining to low valuation coverage, poor tax ratios, adverse valuation ratios and unacceptably low collection rates.


Realizing the shortfall of public finance due to the loss of revenue rating and in an attempt to replace this shortfall, Tanzania in 1974 passed the land Rent and Service Charge Act. But due to lack of reliable market values, statutory rent (legally stipulated rates) was used. The valuation of ratings is currently governed by the Urban Authorities (Rating) Act of 1983 which reintroduced property taxes based on annual rental value and permitted rating authorities to set property rate based on authorities’ financial needs. This institutional mechanism needs to be strengthened with some modifications.

In May 1995, Tanzania adopted a new land policy reversing the socialist policies of past decades. This policy came about after careful research and public inquiry into land matters initiated in 1989. The result was the reintroduction of private property rights and legalized market alienation (right to assign or transfer ownership) of land. The land policy also strongly recommended the introduction of land value rating not only as efficient source of revenue for local governments, but also as the preferred policy instrument for managing the development of urban sites and speculative land acquisition in Tanzania. The country should now move ahead with full implementation of land value capture policy.

Given the fact that Tanzania has allocated so much land (22 million ha) to reserves, depending on the use of these reserves there is potential for a significant amount of public revenue to be generated via use fees for access to these reserves for specified purposes.

In total, Tanzania has strong opportunities to implement land value capture and be well on the path to economic prosperity.


The biggest threats are the high rate of official corruption and the fact that financial accounts of local government are rarely available for scrutiny. There are also dubious foreign investors that are anxious to get hold of land under the guise of tourism development.

With the shift from the policy of land nationalization to the reintroduction of private property, Tanzania will do well to be on guard against the commercialization of land which results in land speculation thus pushing the price of land far out of the reach of the common man or woman.

With Tanzania’s introduction of private property rights, it seems to be tilting towards the other extreme of land tenure where there will be no separation between private ownership of the improvement on land and the perpetua ownership of land itself.

The government of Tanzania has been accused of using selected bureaucrats to draw up its land reform policy that will favour mostly the rich in terms of choice land allocations.

This SWOT Analysis was written by Gordon Abiama, Director, Africa Centre for Geoclassical Economics with notes taken from Land Value Taxation Around The World, an anthology compiled by Robert Andelson and published by the Robert Schalkenbach Foundation.

Tsingtao, China

Tsingtao, capital of Kiaochow, China

By Jeffrey J. Smith

Historical Background

When Germany established colonies in Africa and the Pacific towards the end of the 1800s, they developed roads and harbors, which increased commerce. That in turn increased land values. Speculators rushed in to buy and sell land and captured much of the gain from the government's spending.

In 1898 the German Empire acquired a colony in China, Kiaochow, now spelled Jiaoxian or Jiaozhou, located in Shangdong (formerly Shantung) province, a peninsula jutting into the Yellow Sea. Germany leased from the weak Chinese emperor the Kiaochow district of about 200 square miles for a hundred years (99 years was the term of the British lease for Hong Kong). Its main population center was the fishing village of Tsingtao of 83,000 inhabitants (now spelled Qingdao).

Kiaochow was held under the jurisdiction of the German Navy Department, not the Colonial Office. The unusual arrangement was due to the efforts of the navy secretary, Alfred von Tirpitz (later to become grand admiral), who held the policies of the latter in low esteem. Tirpitz was sympathetic to progressive socio-political thought, and with his encouragement the Navy Department became a stronghold of land reform ideas.

Adolf W. F. Damasche, whose persuasive and organizational talents later built the Bund deutscher Bodenreformer (German Land Reform League) into a powerful body with around 100,000 members, was able to win over a number of high naval officers to the cause, who became members of the Bund. One of these was Admiral Otto von Diederichs, whose forces had conquered and occupied Kiaochow, and who served as its military governor. Admirals Diederichs and Tirpitz were determined that land speculation, which severely afflicted the German colonies in East Africa, not be permitted to take hold in the new protectorate.

The admirals appointed as Imperial Commissioner for Kiaochow the talented Ludwig Wilhelm Schrameier. As a member of the German Land Reformers, he had read the works of Henry George, the American economist who identified land speculation and land price inflation as the main cause of depressions. Henry George wrote that the public collection of the land rent would eliminate land speculation and maintain land price stability. By getting government revenue from land rent instead of taxing labor and capital, there would be prosperity without the injustice and burdens of taxing labor and enterprise.

Schramaier claimed not to have been influenced by Georgism directly, but by the practical necessities of administering the territory. He enacted a single tax of six percent of the assessed value of land and subjected each land sale to an increment tax whose rate was one third of the net profit when land was sold. The government had the prior right of purchase at the price reported, thus discouraging anyone from reporting a lower sales price in order to reduce his increment tax. The land-value increment tax in Kiaochow was the first to be adopted anywhere in the world. Schrameier also refrained from levying any other tax. That was probably the only time in history that a government collected all its revenue from land rent, and none from the value of buildings or business or from wages.

The single tax on land value worked as splendidly in practice as it had in theory. Once it was implemented, there was no more land speculation, and economic growth was very rapid. Not only did it discourage speculators, it also funded the colonial government without levying any of the usual counterproductive taxes on structures or sales or salaries, just on sites.

The price of land is an estimate by the buyer of how much rent the site will yield over the next decade plus; as economists would put it, land price is capitalized land rent. When government collects all the rent, that leaves none for owners to capitalize into price. Economic historians (see references below) estimate that at six percent, the German protectorate collected about half of Kiaochow’s available site rent. Depriving owners of half of rent, a socially generated value, did nothing to inhibit development; on the contrary, it spurred landowners to develop Tsingtao into a splendid city.

In 1915 at the beginning of World War I, the Japanese military captured Kiaochow, ending German rule forever. By then, Tsingtao had become the fourth most important trading port on the China coast. The area's population had increased to 275,000. Economic historians (below) did not note whether the Japanese abandoned the German taxing system or if the Chinese did upon evicting the Japanese at the end of World War II. Whoever installed a different taxing system, it cost Tsingtao its glory.

Its brief yet successful existence did leave a legacy. After seeing Tsingtao thrive, Sun Yat-sen, who was to become the revolutionary leader of China, studied the policy of taxing only land values when he went to school in Hawaii. At the time, the policy of public recovery of rent was well known, as was its foremost proponent, Henry George. When Sun returned to China, he sought to use land rent for public revenues for all of China; he retained the German Schrameier as his consultant.

Eventually, Sun failed but two decades later, the Nationalists adopted his program for Taiwan. During the next 50 years, the small island developed from a poor province to a modern prosperous economy with one of the most equal distributions of income in the world. In the decade of the 2000s, mainland China partially utilizes public recovery of ground rent, and Hong Kong has done so from day one in 1898 (the year after Henry George died on the other side of the Pacific Ocean).

Another way one can realize the German legacy from Kiaochow today is to taste the German recipe for brewing by drinking the savory Tsingtao beer.

1) Michael Silagi, Susan N. Faulkner. “Land Reform in Kiaochow, China: From 1898 to 1914 the Menace of Disastrous Land Speculation Was Averted by Taxation”, American Journal of Economics and Sociology, Vol. 43, No. 2 (Apr., 1984), pp. 167-177.

2) Michael Silagi, Susan N. Faulkner. “Henry George and Europe: Early Efforts to Organize Germany's Land Reformers Failed, but the Pioneers Won a National Demonstration”, American Journal of Economics and Sociology, Vol. 52, No. 1 (Jan., 1993), pp. 119-127.

3) Fred E. Foldvary. “Market-Hampering Land Speculation: Fiscal and Monetary Origins and Remedies”, American Journal of Economics and Sociology, Vol. 57, No. 4 (Oct., 1998), pp. 615-637

4) V. G. Peterson, Tseng Hsiao. “Kiao-chau” American Journal of Economics and Sociology, (Dec, 2000)


There is no greater strength than success. Tsingtao was an unqualified success by any economic measure of the era. It grew rapidly, its people prospered, and it so impressed China’s modern founder, Sun Yat-sen, that he made it his model for his economic policy for all of China. If any present region wishes to develop itself, it can simply do what Kiaochow did and recover ground rent while eschewing taxation. Kiaochow was also fortunate in that its rulers were not locals who normally are from the landowning class and accustomed to speculating in land but were outsiders with a different agenda, one of economic growth.


The weakness of the Kiaochow model is not economic but political: it was not the outcome of the democratic process but the decision of the powers above. To use geonomics (rent recovery in lieu of taxation on efforts), policy makers must be educated. For a populace to vote in geonomics, they themselves must be educated. It is very difficult to generate the requisite enlightenment in either rulers or the ruled. Kiaochow was also unfortunate in being a pleasant environment located in a war zone; losing its independence, it also lost its geonomics.


Because Kiaochow does have a history of geonomic success and since China’s central government is now embracing a market economy and even utilizing taxes on land value to curtail rampant speculation, there is a chance that, with the proper prodding, Kiaochow might revert to geonomics. Indeed, even all of China might restore its geonomic heritage, since Sun is considered by both Communists and Nationalists to be the Father of Modern China. And because Kiaochow is such a clear before-and-after example and utilized such high rates for its land tax, the story of Kiaochow can be used to show other jurisdictions around the world the way to prosperity for all.


What threatened Kiaochow has already occurred, namely the occupation by the Japanese military and the subsequent to conventional taxation. What prevents a return to geonomics is largely a lack of knowledge of its geonomic past, and among those who know of it, that policy’s association with foreign rulers; the modern Chinese government is sensitive about adopting anything that might excuse their colonial past. However, geonomic policy is not specific to any one culture but is the outcome of rational thought and the scientific method which appears in many cultures. Indeed, Mencius, the Chinese philosopher who taught Confucius thousands of years before Henry George, also advised rulers to tax land value but nothing else.

Washington, DC, USA

SWOT Analysis - Potential for
Land Value Tax/Capture for Washington, DC

By Walter Rybeck, Director, Center for Public Dialog

Note: The policy has not yet been implemented in Washington but this SWOT is based on analysis and previous studies of the potential benefits.


Computer simulation studies have shown that Washington, D.C., would benefit greatly from LVT, either in its pure form as a land value tax with no tax at all on homes, apartments, office buildings and other structures, or as a more modest two-rate tax, with higher tax rates on land values and lower rates on improvements. Over three-quarters of homeowners would pay lower annual property taxes. The biggest percentage reductions would go to homeowners in the city’s poorer neighborhoods. As a general rule, both businesses and residential owners whose structures represent a large portion of the total property value would benefit, while those whose land value represents all or most of the value would pay higher taxes.

  1. Creating Affordable Housing. LVT and the two-rate tax shift property tax burdens off buildings and on to the underlying land values.
    • This would stifle the land price escalation that is by far the biggest factor in pushing the cost of housing in the District of Columbia beyond the reach of poor and many middle class families.
    • This would take the profit out of land speculation (holding land idle, plus the holding of boarded-up housing units) and induce owners to cater to the demand for affordable home prices or apartment rents. In other words, this reform shifts the financial incentives from land holding to land using.
  2. Generating Greater Use of Mass Transit. A Congressional study demonstrated that the Metro, Washington’s subway system, has generated billions of dollars worth of land values that would not have occurred in its absence. This study noted that the bulk of these socially-created values currently are pocketed by landholders who were clever enough or lucky enough to hold strategic sites near Metro stops. Unfortunately, these values were not being recaptured by the transit system that made the land more valuable.
    • Reduced fares, making transit more attractive, would be the result of using LVT to recycle land values spawned by Metro and other public transportation facilities to meet the costs of maintaining and improving the transit systems.
    • More transit-oriented development would result from the use of LVT to discourage non-use or under-use of sites around mass transit nodes. Thus more transit riders, and more desirable destinations for transit users, would be located along the transit corridors, making for far more effective and efficient use of the transit systems.
  3. Reducing Traffic Congestion. It follows from the previous point that there would be more compact development rather than sprawl into the suburbs and countryside. It is not rare for many people who work in Washington to spend several hours daily commuting from distant communities. Rationalizing land use patterns through LVT would greatly reduce reliance on cars and greatly increase the use of buses and trains.
  4. Improving Air Quality. The two previous points make it obvious that, as automobile traffic is reduced, air pollution would be reduced at the same time.
  5. Stimulating In-City Production and Jobs. Putting idle and severely under-utilized central city sites of Washington into appropriate development—which has occurred in every city where LVT has been applied—would bring businesses and jobs back into these locations. This would counter the present trend of urbanizing acres out in the middle of cornfields and stringing shops and industries along rural highways.


A potential weakness of LVT or the two-rate tax is that, by changing the rules of the game, a number of reasons are often cited for not instituting this important reform, even though they may not be valid:

  1. “We’ve never done it that way.” Even though the present system has many disadvantages, there is often a general hesitation to change it. This tends to be especially true for officials who have relied on the old revenue system and do not want to rock the boat.
  2. “This will hurt poor land owners.” This argument tends to be used by rich land owners who don’t want to appear to be self serving. Actually, almost by definition, there are few poor owners of valuable sites. To the extent there are a few, there are practical ways of postponing their requirement to pay higher land taxes until their property is sold.
  3. “My vacant land isn’t ripe for more intense use.” This may be true in some cases, which is a good argument for using the two-rate tax which allows for the gradual shifting of property tax burdens to land from buildings. In places where this has been done, officials note that property owners hardly notice the change—yet the LVT incentives to put strategic locations to use often show that there were indeed latent demands for greater use of these vacant sites.
  4. “It’s against the law.” In some locations, this is actually true. Some state constitutions require that all property be assessed and taxed at the same rate.
  5. “That radical reform will ruin our city.” Powerful land speculators often generate unfounded public fears to shift the focus away from the benefits of a fairer, more logical and more productive property tax system.

Where state constitutions stand in the way, amendments are required to give localities the option—or perhaps the mandate—to use LVT.

Some state constitutions have a less severe restriction—requiring that all property of the same class be assessed and taxed at the same rate. In these cases, all that is needed is not an amendment, but rather a law designating that land and improvements are to be designated as separate classes of property.

There are no constitutional obstacles to LVT in Washington, D.C., having obtained a federal law (PL 93-407) permitting the city to tax land and structures at different rates. Yet it is still necessary to undertake an education campaign, both among officials and the general public, to overcome some of the sentiments expressed above.


It is nothing short of scandalous that, in the face of persistent homelessness in the capital of the world’s richest nation, the District of Columbia, by latest count, had some 8,000 vacant lots and about 10,000 boarded-up housing units. Putting these sites and potential homes into service for the residents of Washington is a crusade waiting to happen.

Besides homelessness and excessively costly home prices and rents, Washington suffers from high unemployment, people living on wages too low for adequately supporting their families, and the flight of good jobs, businesses and taxpayers to outlying areas. These and related problems have spawned various advocacy groups seeking ways to ease these problems. Letting these groups know about the success of LVT in addressing these very problems in other cities and regions should open the way to making the District of Columbia a shining example of how a city can achieve well being and justice for all its citizens.


Those in Washington who favor the current upside-down property tax are a small but potent interest group. They are by far the most generous contributors to local political campaigns. They profit handsomely from the present system and put pressure on politicians to keep it as it is. They benefit from the sad fact that too few journalists, economists and political scientists present the virtues of LVT in public forums. This is the challenge to those who are aware of the remarkable achievements of LVT in the places where it has been used.