catapult magazine

The Land Speculation Problem – Errors in Our Present Form of Taxation and Law

1 – The Problem:[/b:9cea71ec5f]

Suppose there is a man, seeking to invest his money wisely, buys a piece of land (5 acres for $5000) located outside of the city he lives in. He has no plans of developing that land himself but instead is hoping to profit from it at a later time once the city in which he dwells begins to expand closer and closer to his site. Over time the increased demand for land will drive the selling price of his land up.

He has nothing to lose in this situation except a possible decrease in profit given he had put the money in a bank and earned interest instead of buying the land. There are no buildings and no roads so no extra taxes there. There is a tax levied on the value of the land but it is minimal, so he loses a small sum due to taxes.

Time progresses and the man finds that he has made a wise decision. The town expands creating a high demand for new housing which creates a increase in demand for neighboring land for development. Seeing this situation the man holds his ground. Many of the neighboring land owners are selling their land to the developers for development but he chooses to wait it out some more in hope that the land will increase in value all the more.

After a few years the man once again finds he has made a wise decision. On all sides of his land there is a thriving city. Four and five story apartment buildings are butted right up to his property line, businesses have left the heart of the city for the lush parks and countryside that the outskirts of the city provides, and civic buildings such as public libraries and schools have all found there way into the new development.

At this time the man decides to sell. His 5 acre lot which he purchased for $5000 5 years previous he now sells for $500,000 ? a 100,000% total increase or 298% effective interest per year for the five years.

Not a bad investment.

But is it just?

What labor merited his $495,000 profit?

Where did the money come from? Who earned it? Who has rights to it?

Isaiah 65
21 They will build houses and dwell in them; they will plant vineyards and eat their fruit.
22 No longer will they build houses and others live in them, or plant and others eat. For as the days of a tree, so will be the days of my people; my chosen ones will long enjoy the works of their hands.

With the present state of things the man’s profit is 100% legal. Our government supports the private ownership of land (as do I) but not justly.

It should be clear to all who think about the situation that the profit that man takes for the land is not his. In effect he is stealing but our system allows (and encourages) such activity. He has not labored in any way such that is rightly proportional to his wage.

The man is not working but is eating pretty darn well.

There is no such thing as a free lunch. The profit the man has accumulated for himself MUST come from somewhere and the “somewhere” is the community at large. He did not steal from any one person but instead has, in effect, robbed everybody.

The community gave his property value, therefore the increase in value is the community’s not his.

Solution:[/b:9364e69042]

There are many possible ways of fixing this problem but the only one which has convinced me would work is this:

a tax on the value of land (not capital improvements) and decrease (ideally get rid of) all other taxes. [/i:9364e69042]

This would result in the most efficient use of land and the fairest distribution of wealth. Wasteful development (Sprawl) would no longer be economically beneficial, there would be no vacant lots in downtown areas, and the worker would keep his wage – increasing productivity. Free trade would also get a huge boost as we would no longer penalize each transaction with a sales tax, gas tax, or capital improvement tax.

We would be free to produce at full capacity and once again compete with China and other nations.

No longer would we penalize anybody for being productive! Instead man would eat the fruit of his hands and the increased wealth produced by the community at large would be owned and shared by that community. Communities would have the money to support great Civic Art – the one thing that, for all the joys of living in America, is one of her true downfalls.

There has been some work being done in this area (see links below) but as Christians we should lobby for and spread the word about such a tax system. It would bring communities together physically (which will encourage the natural spreading of the Gospel) and it would encourage the development of an economically just society.

Robert Schalkenbach Foundation – Single Tax

Maryland Property Tax Project

Urban Tools