How To Abolish Unfair Taxation

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by Clarence Darrow, Attorney, Philosopher

Clarence Darrow of Chicago became known and respected the world round as a courageous and intelligent foe of special privilege and monopoly.

His social and economic philosophy rested on the same basic principles as those of Thomas Paine, Thomas Jefferson and Abraham Lincoln.
Everybody nowadays is anxious to help do something for the poor, especially they who are on the backs of the poor; they will do anything that is not fundamental. Nobody ever dreams of giving the poor a chance to help themselves. The reformers in this state have passed a law prohibiting women from working more than eight hours in one day in certain industries – so much do women love to work that they must be stopped by law. If any benevolent heathen see fit to come here and do work, we send them to gaol or send them back where they came from.

All these prohibitory laws are froth. You can only cure effects by curing the cause. Every sin and every wrong that exists in the world is the product of law, and you cannot cure it without curing the cause. Lawyers, as a class, are very stupid. What would you think of a doctor, who, finding a case of malaria, instead of draining the swamp, would send the patient to gaol, and leave the swamp where it is? We are seeking to improve conditions of life by improving symptoms.

Land Basic

No man created the earth, but to a large extent all take from the earth a portion of it and mould it into useful things for the use of man. Without land man cannot live; without access to it man cannot labour. First of all, he must have the earth, and this he cannot have access to until the single tax is applied. It has been proven by the history of the human race that the single tax does work, and that it will work as its advocates claim. For instance, man turned from Europe, filled with a population of the poor, and discovered the great continent of America. Here, when he could not get profitable employment, he went on the free land and worked for himself, and in those early days there were no problems of poverty, no wonderfully rich and no extremely poor – because there was cheap land. Men could go to work for themselves, and thus take the surplus off the labour market. There were no beggars in the early days. It was only when the landlord got in his work – when the earth monopoly was complete – that the great mass of men had to look to a boss for a job.

All the remedial laws on earth can scarcely help the poor when the earth is monopolized. Men must live from the earth, they must till the soil, dig the coal and iron and cut down the forest. Wise men know it, and cunning men know it, and so a few have reached out their hands and grasped the earth; and they say, “These mines of coal and iron, which it took nature ages and ages to store, belong to me; and no man can touch them until he sees fit to pay the tribute I demand”.

Pirates Demand Tribute

Nature prepared the earth for ages to make a mine of iron ore, which is so useful in civilized life. It was here before man came, and will be here after he is gone, and yet a plundering, soulless, conscienceless band of pirates, called the steel trust, have taken possession of all the iron in America, and they say to every man who will use it: “You must pay us tribute.” And every time two dollars is paid for their product one dollar goes to labour, and one dollar is taken as plunder pure and simple, because of the foolish laws of man. They can take from the farmer and labourer all that they earn except enough to keep them alive still to toil for the monopolist.

You may make eight-hour laws, you may make laws regulating sweat shops and factories, but so long as a few rich men own the earth, there will be a few rich and many millions of helpless poor. As population becomes more dense, the proportion of poor will increase.


The labouring man takes no account of fundamentals. Millions of working men have organized themselves into great unions to protect themselves, to force up their side to counteract the forcing up bv the other side. These millions have organized for a most impossible purpose. They seek to change the social life in an impossible way. Their higher wages will be handed back to monopoly in higher prices. If a small fraction of the energy and money that has been given by the working men to support labour unions had been spent to change fundamental conditions, there would be no need of a labour union in the world today. Everywhere about us we can see that the conditions cannot change while land monopoly continues.

Most of our laws were made by the dead, and the dead have no right to legislate for the living. The present generation has no right to bind its legislation upon the generation still unborn. When one generation is dead, it ought to stay dead and not reach out its dead hand to bind the living. We have no right to fix terms and conditions for those yet unborn; it is for each generation to fix the rules and regulations for itself. The earth should be owned by all men, the coal mines should belong to the people who live here, so they can take what they want while they live, as when they are dead they won’t need coal – they will be warm enough without it – and they should not have the power to say who shall have it when they are gone. Carnegie and Morgan cannot use or withhold it much longer, as they will soon be gone – that is one consolation.

Eminent Domain

Fundamentally, all law recognizes the right to eminent domain, to take the portion of any human being for the welfare of the public – that no man’s claim to any portion of the earth shall stand in the way of the common good. This is a common law, but in practice it only applies where a rich railroad wants to get the land of some poor widow.

Everybody who works is poor; nobody would work if they were not poor, and nobody can get rich working. I never tried it, but I have seen others try it. The land boomer comes along and gets good car service to this poor man’s home, and then charges him ten dollars per month instead of five. A lot of reformers are trying to get parks laid out in the slums, which only make the poor move, for they cannot pay the increased rent. The greater the population, the less the worker gets. As the land becomes valuable, more and more goes to rent. The bigger the city, the deeper the poverty; the bigger the city the more degradation, there are the almshouses and gaols filled to overflowing. It is better for the men who own the earth to have big cities – but for no one else. Every man, woman, and child adds to the wealth of the land owner; the others must secure land upon which to live, and they must bid with each other for the right to live.

Surplus to the Monopolist

Beyond a living all surplus goes to the monopolist, and it does go to him. You talk about a city of a million in 1915 – who would be benefited? Not the workingman; he would be far worse off than at present, for the greater the city the greater the poverty.

Taxes on goods are added to the price of goods and passed on to the consumer. There is only one kind of tax that is not a curse, and that is the land tax. If you tax a pair of shoes a dollar, the manufacturer will add that to the price of the shoes, and thus diminish the number of shoes the people can buy. The higher you tax the land the more land is thrown on the market and the easier it is to secure, and it is the only thing that increases by taxation.

The higher the tax on land the more it comes into use, and so “single tax” is a positive blessing. It is the only tax that does not come out of labour, it comes out of the monopolist; it stays right there, and that fact compels them to put the land to some use, and that employs labour.

Natural Fund

The single tax theory is that the public should take all the value of land, as it was made by the public. Land value goes up because of population, and not because of the owner of the title deed, and the value should be taken by the community, and thus create a natural fund from which to make improvements for the comfort of all, and thus make life easier. It would abolish poverty, that crime of the century, which has always come with civilization; inequality of wealth, which comes as the world grows older, and which we have never been able to cure, because man wants to hold what he cannot use, and pass on to future generations what they will not use.

The personal property tax always was a delusion, a humbug, and a snare; it never could be administered justly. The conscientious man, the widow and the orphans (whose fund is in trust) pay in full while the rich get off. It is unscientific, it is bad as a fiscal measure. What we are after is the earth, and it can be had in an easy, simple, direct way.

Every right-of-way of every railroad should be owned by the people; all public franchises, every mine and every forest, all should belong to the community itself. Then we would not need the repressive laws we have today.

Men love peace, and if not antagonized, they will behave, and until justice is done in that good time to come, all the gaols on earth cannot make them behave. It never did, and it never will.

The “single tax” is so simple, so fundamental, and so easy to carry into effect that I have no doubt it will be about the last reform the world will ever get. People in this world are not often logical; in fact, there is never any considerable number of them that are logical. I am pretty sure the people will never get started in the right direction; they will go a long way around.

Winston Churchill on Site Rating

Casey JenkinsEndorsements, HistoryLeave a Comment


Winston Churchill’s Speech in the House of Commons, 4 May 1909, in response to Mr AJ Balfour, Leader of the Opposition

The immemorial custom of nearly every modern State, the mature conclusions of many of the greatest thinkers, have placed the tenure, transfer, and obligations of land in a wholly different category from other classes of property. The mere obvious physical distinction between land, which is a vital necessity of every human being and which at the same time is strictly limited in extent, and other property is in itself sufficient to justify a clear differentiation in its treatment, and in the view taken by the State of the conditions which should govern the tenure of land from that which should regulate traffic in other forms of property.
Unearned Increment

When the Leader of the Opposition seeks by comparisons to show that the same reasoning which has been applied to land ought also in logic and by every argument of symmetry to be applied to the unearned increment derived from other processes which are at work in our modern civilisation, he only shows by each example he takes how different are the conditions which attach to the possession of land and speculation in the value of land from those which attach to other forms of business speculation.

“If,” he inquires, “you tax the unearned increment on land, why don’t you tax the unearned increment from a large block of stock? I buy a piece of land; the value rises. I buy stocks; their value rises.” But the operations are entirely dissimilar. In the first speculation the unearned increment derived from land arises from a wholly sterile process, from the mere withholding of a commodity which is needed by the community. In the second case, the investor in a block of shares does not withhold from the community what the community needs. The one operation is in restraint of trade and in conflict with the general interest, and the other is part of a natural and healthy process, by which the economic plant of the world is nourished and from year to year successfully and notably increased.

Landowner and Railway Co.

Then the right hon. gentleman instanced the case of a new railway and a country district enriched by that railway. The railway, he explained, is built to open up a new district; and the farmers and landowners in that district are endowed with unearned increment in consequence of the building of the railway. But if after a while their business aptitude and industry create a large carrying trade, then the railway, he contends, gets its unearned increment in its turn.

But the right hon. gentleman cannot call the increment unearned which the railway acquires through the regular service of carrying goods, rendering a service on each occasion in proportion to the tonnage of goods it carries, making a profit by an active extension of the scale of its useful business – he cannot surely compare that process with the process of getting rich merely by sitting still? It is clear that the analogy is not true.

The Glasgow Example

I do not think the Leader of the Opposition could have chosen a more unfortunate example than Glasgow. He said that the demand of that great community for land was for not more than forty acres a year. Is that the only demand of the people of Glasgow for land? Does that really represent the complete economic and natural demand for the amount of land a population of that size requires to live on? I will admit that at present prices it may be all that they can afford to purchase in the course of a year. But there are one hundred and twenty thousand persons in Glasgow who are living in one-room tenements; and we are told that the utmost land those people can absorb economically and naturally is forty acres a year.

What is the explanation? Because the population is congested in the city the price of land is high upon the suburbs, and because the price of land is high upon the suburbs the population must remain congested within the city. That is the position which we are complacently assured is in accordance with the principles which have hitherto dominated civilised society.

The “Poor Widow” Bogey

But when we seek to rectify this system, to break down this unnatural and vicious circle, to interrupt this sequence of unsatisfactory reactions, what happens? We are not confronted with any great argument on behalf of the owner. Something else is put forward, and it is always put forward in these cases to shield the actual landowner or the actual capitalist from the logic of the argument or from the force of a Parliamentary movement.

Sometimes it is the widow. But that personality has been used to exhaustion. It would be sweating in the cruellest sense of the word, overtime of the grossest description, to bring the widow out again so soon. She must have a rest for a bit; so instead of the widow we have the market-gardener – the market-gardener liable to be disturbed on the outskirts of great cities, if the population of those cities expands, if the area which they require for their health and daily life should become larger than it is at present.

What is the position disclosed by the argument? On the one hand, we have one hundred and twenty thousand persons in Glasgow occupying one-room tenements; on the other, the land of Scotland. Between the two stands the market-gardener, and we are solemnly invited, for the sake of the market-gardener, to keep that great population congested within limits that are unnatural and restricted to an annual supply of land which can bear no relation whatever to their physical, social, and economic needs – and all for the sake of the market-gardener, who can perfectly well move farther out as the city spreads and who would not really be in the least injured.


From a Speech Delivered at King’s Theatre in Edinburgh on 17 July 1909

It is quite true that land monopoly is not the only monopoly which exists, but it is by far the greatest of monopolies – it is a perpetual monopoly, and it is the mother of all other forms of monopoly. It is quite true that unearned increments in land are not the only form of unearned or undeserved profit which individuals are able to secure; but it is the principal form of unearned increment which is derived from processes which are not merely not beneficial, but which are positively detrimental to the general public.

Land, which is a necessity of human existence, which is the original source of all wealth, which is strictly limited in extent, which is fixed in geographical position. Land, I say, differs from all other forms of property in these primary and fundamental conditions.

Nothing is more amusing than to watch the efforts of our monopolist opponents to prove that other forms of property and increment are exactly the same and are similar hl all respects to the unearned increment in land.

Misleading and False Analogies

They talk to us of the increased profits of a doctor or a lawyer from the growth of population in the towns in which they live. They talk to us of the profits of a railway through a greater degree of wealth and activity in the districts through which it runs. They tell us of the profits which are derived from a rise in stocks and shares, and even of those which are sometimes derived from the sale of pictures and works of art, and they ask us – as if it were the only complaint: “Ought not all these other forms to be taxed, too?”

But see how misleading and false all these analogies are. The windfalls which people with artistic gifts are able from time to time to derive from the sale of a picture – from a Vandyke or a Holbein – may here and there be very considerable. But pictures do not get in anybody’s way. They do not lay a toll on anybody’s labour; they do not touch enterprise and production at any point; they do not affect any of those creative processes upon which the material well-being of millions depends.

Rewards for Service

If a rise in stocks and shares confers profits on the fortunate holders far beyond what they expected or indeed deserved, nevertheless that profit has not been reaped by withholding from the community the land which it needs, but, on the contrary, apart from mere gambling, it has been reaped by supplying industry with the capital without which it could not be carried on.

If the railway makes greater profits, it is usually because it carries more goods and more passengers. If a doctor or a lawyer enjoys a better practice, it is because the doctor attends more patients and more exacting patients, and because the lawyer pleads more suits in the courts and more important suits. At every stage the doctor or the lawyer is giving service in return for his fees, and if the service is too poor or the fees are too high other doctors and other lawyers can come freely into competition. There is constant service, there is constant competition; there is no monopoly, there is no injury to the public interest, there is no impediment to the general progress.

Fancy comparing these healthy processes with the enrichment which comes to the landlord who happens to own a plot of land on the outskirts or at the centre of one of our great cities, who watches the busy population around him making the city larger, richer, more convenient, more famous every day, and all the while sits still and does nothing.

Enrichment Without Service

Roads are made, streets are made, railway services are improved, electric light turns night into day, electric trams glide swiftly to and fro, water is brought from reservoirs a hundred miles off in the mountains – and all the while the landlord sits still. Every one of those improvements is effected by the labour and cost of other people. Many of the most important are effected at the cost of the municipality and of the ratepayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is sensibly enhanced. He renders no service to the community, he contributes nothing to the general welfare; he contributes nothing even to the process from which his own enrichment is derived.

If the land were occupied by shops or by dwellings, the municipality at least would secure the rates upon them in aid of the general fund, but the land may be unoccupied, undeveloped, it may be what is called “ripening” – ripening at the expense of the whole city, of the whole country for the unearned increment of its owner. Roads perhaps have to be diverted to avoid this forbidden area. The merchant going to his office, the artisan going to his work, have to make a detour or pay a tram fare to avoid it. The citizens are losing their chance of developing the land, the city is losing its rates, the State is losing its taxes which would have accrued if the natural development had taken place, and that share has to be replaced at the expense of the other ratepayers and taxpayers; and the nation as a whole is losing in the competition of the world – the hard and growing competition of the world – both in time and money.

And all the while the land monopolist has only to sit still and watch complacently his property multiplying in value, sometimes manifold, without either effort or contribution on his part. And that is justice!

Monopoly is the Keynote

But let us follow the process a little further. The population of the city grows, and grows still larger year by year, the congestion in the poorer quarters becomes acute, rents and rates rises hand in hand, and thousands of families are crowded into one-roomed tenements. There are 120,000 persons living in one-roomed tenements in Glasgow alone at the present time. At last the land becomes ripe for sale -that means that the price is too tempting to be resisted any longer. And then, and not till then, it is sold by the yard or by the inch at 10 times, or 20 times, or even 50 times its agricultural value, on which alone hitherto it has been rated for the public service.

The greater the population around the land, the greater the injury which they have sustained by its protracted denial, the more inconvenience which has been caused to everybody, the more serious the loss in economic strength and activity, the larger will be the profit of the landlord when the sale is finally accomplished. In fact, you may say that the unearned increment on the land is on all fours with the profit gathered by one of those American speculators who engineer a corner in corn, or meat, or cotton, or some other vital commodity, and that the unearned increment in land is reaped by the land monopolist in exact proportion, not to the service, but to the disservice done. It is monopoly which is the keynote, and where monopoly prevails the greater the injury to society the greater the reward to the monopolist will be.

Land Monopoly Hampers Industry

See how this evil process strikes at every form of industrial activity. The municipality, wishing for broader streets, better houses, more healthy, decent, scientifically planned towns, is made to pay, and is made to pay in exact proportion, or to a very great extent in proportion, as it has exerted itself in the past to make improvements. The more it has improved the town the more it has increased the land value, and the more it will have to pay for any land it may wish to acquire.

The manufacturer proposing to start a new industry, proposing to erect a great factory offering employment to thousands of hands, is made to pay such a price for his land that the purchase price hangs round the neck of his whole business, hampering his competitive power in every market, clogging him far more than any foreign tariff in his export competition, and the land values strike down through the profits of the manufacturer on to the wages of the workman. The railway company wishing to build a new line finds that the price of land which yesterday was only rated at its agricultural value has risen to a prohibitive figure the moment it was known that the new line was projected, and either the railway is not built, or, if it is, is built only on terms which largely transfer to the landowner the profits which are due to the shareholders and the advantages which should have accrued to the travelling public.

It does not matter where you look or what examples you select, you will see that every form of enterprise, every step in material progress, is only undertaken after the land monopolist has skimmed the cream off for himself. and everywhere today the man or the public body that wishes to put land to its highest use is forced to pay a preliminary fine in land values to the man who is putting it to an in- ferior use, and in some cases to no use at all. All comes back to the land value, and its owner for the time being is able to levy his toll upon all other forms of wealth and upon every form of industry.

The Error of Public Tollways

A portion, in some cases the whole, of every benefit which is laboriously acquired by the community is represented in the land value, and finds its way automatically into the landlord’s pocket. If there is a rise in wages, rents are able to move forward, because the workers can afford to pay a little more. If the opening of a new railway or a new tramway, or the institution of an improved service of workmen’s trains, or a lowering of fares, or a new invention, or any other public convenience affords a benefit to the workers in any particular district, it becomes easier for them to live, and therefore the landlord and the ground landlord, one on top of the other, are able to charge them more for the privilege of living there.

Some years ago in London there was a toll-bar on a bridge across the Thames, and all the working people who lived on the south side of the river had to pay a daily toll of one penny for going and returning from their work. The spectacle of these poor people thus mulcted of so large a proportion of their earnings appealed to the public conscience; an agitation was set on foot, municipal authorities were roused, and at the cost of the ratepayers the bridge was freed and the toll removed. All those people who used the bridge were saved 6d. a week. Within a very short period from that time the rents on the south side of the river were found to have advanced by about 6d. a week, or the amount of the toll which had been remitted.

Neutralising Philanthropy

And a friend of mine was telling me the other day that, in the parish of Southwark, about 350 pounds a year, roughly speaking, was given away in doles of bread by charitable people in connection with one of the churches, and, as a consequence of this, the competition for small houses, but more particularly for single-roomed tenements, is, we are told, so great that rents are considerably higher than in the neighbouring district.

All goes back to the land, and the landowner, who, in many cases, in most cases, is a worthy person utterly unconscious of the character of the methods by which he is enriched, is enabled with resistless strength to absorb to himself a share of almost every public and every private benefit however important or however pitiful those benefits may be.

Let Us Alter the Law

I hope you will understand that, when I speak of the land monopolist, I am dealing more with the process than with the individual landowner. I have no wish to hold any class up to public disapprobation. I do not think that the man who makes money by unearned increment in land is morally a worse man than anyone else who gathers his profit where he finds it in this hard world under the law and according to common usage. It is not the individual I attack, it is the system. It is not the man who is bad, it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do, it is the State which would be blameworthy were it not to endeavour to reform the law and correct the practice. We do not want to punish the landlord. We want to alter the law.

Take the case to which I have already referred, of the man who keeps a large plot in or near a growing town idle for years, while it is “ripening” – that is to say, while it is rising in price through the exertions of the surrounding community and the need of that community for more room to live. Take that case. I daresay you have formed your own opinion upon it. Mr. Balfour, Lord Lansdowne, and the Conservative Party generally, think that that is an admirable arrangement. They speak of the profits of the land monopolist, as if they were the fruits of thrift and industry and a pleasing example for the poorer classes to imitate.

The Dog in the Manger

We do not take that view of the process. We think it is a dog-in-the-manger game. We see the evil, we see the imposture upon the public, and we see the consequences in crowded slums, in hampered commerce, in distorted or restricted development, and in congested centres of population, and we say here and now to the land monopolist who is holding up his land – and the pity is it was not said before – you shall judge for yourselves whether it is a fair offer or not-we say to the land monopolist – “This property of yours might be put to immediate use with general advantage. It is at this minute saleable in the market at 10 times the value at which it is rated. If you choose to keep it idle in the expectation of still further unearned increment then at least you shall be taxed at the true selling value in the meanwhile.”

Free Trade – Free Land!

Every nation in the world has its own way of doing things, its own successes and its own failures. All over Europe we see systems of land tenure which economically socially, and politically are far superior to ours; but the benefits that those countries derive from their improved land systems are largely swept away, or at any rate neutralised, by grinding tariffs on the necessaries of life and the materials of manufacture.

In this country we have long enjoyed the blessings of Free Trade and of untaxed bread and meat, but against these inestimable benefits we have the evils of an unreformed and vicious land system. ln no great country in the new world or the old have the working people yet secured the double advantage of Free Trade and Free Land together, by which I mean a commercial system and a land system from which, so far as possible, all forms of monopoly have been rigorously excluded.

An Hour of Tremendous Opportunity

Sixty years ago our system of national taxation was effectively reformed, and immense and undisputed advantages accrued therefrom to all classes, the richest as well as the poorest. The system of local taxation to-day is just as vicious and wasteful, just as great an impediment to enterprise and progress, just as harsh a burden upon the poor, as the thousand taxes and Corn Law sliding scales of the “hungry forties.”

We are met in an hour of tremendous opportunity.

“You who shall liberate the land,” said Mr. Cobden, “will do more for your country than we have done in the the liberation of its commerce.”

The Middle Class Must Not Fail Or All Is Lost

Karl FitzgeraldInternational1 Comment



With the rise of the Industrial Civilization in the world about two hundred years ago, there also arose a social body which we know as the middle class. Before that, most of the world suffered under a feudal system in which the people were truly slaves of their governments in all things. There was no strong buffer between them and their despotic rulers, no assurance of freedom to pursue commerce and to live decently, to keep the fruits of their labor and hold the paying of tribute at a minimum. The middle class made the dream of liberty a possibility, set limits on the government, fought for its constitutions, removed much of governmental privilege and tyranny, demanded that rulers obey the just laws as closely as the people, and enforced a general civic morality.

Sound leaders looked to the experience of Rome, the first to encourage a middle class, noting that Rome had been a strong and prosperous Republic, with much public virtue, a large degree of freedom for every citizen, and a constitution (the Twelve Tables of Law) on which our own is based. After the fall of Rome, governments had everywhere destroyed the middle class, returned to despotism, and entered the Dark Ages. It had been centuries since a rising middle class, looking to the experience of Rome, resolved to keep government at a minimum and to force respect for the people and eschew tribute except for such absolute necessities as armed forces, street protection, and the guarantee of the authority of contracts in commerce.


Those who for centuries had ruled their nations, from father to son, in total despotism, realized that they were threatened. Were they not by birth and money entitled to rule a nation of docile slaves? Did the people not understand that they were truly inferior dogs who needed a strong hand to rule them, and should they not be meek before their government? Were not the people too stupid to understand that the elite needed to extort tribute for their own use?

Little wonder that the elite hated the middle class which challenged them in the name of God-given liberty, and little wonder that this hatred grew deeper as the middle class became stronger and imposed restrictions through which all the people including the most humble had the right to rule their own lives and keep the greater part of what they earned for themselves.

Clearly, if the elite were to rule again, the middle class had to be destroyed. It had to be destroyed so despotism and the system of tribute could be returned, and the grandeur and honor and immense riches for the elite …. assuring their monopoly rule of all the world. For you see the elite of all nations, then as now, were not divided. They were one international class, and worked together and protected each other. But the middle class laughed and said “we will bind you with the chains of our Constitution, which you must obey also, lest we depose you, for we are now powerful and we are human beings and we wish to be free from your old despotism.”

The elite did not give up. While it profited from the Industrial Revolution which under liberty of enterprise freed the people from the feudal and despotic systems, and which gave new birth to the middle class, it also hated the threat to its own authority. It did not wish to destroy the Industrial Revolution; it wished to use it for its exclusive purposes. In the early Nineteenth Century, this elite looked for a way. once and for all, to regain its power and extort tribute from the people and to destroy the burgeoning middle class which stood in its way and to subdue the populaces again to their proper role as slaves of government by the elite.


Through the “League of Just Men,” elitist conspirators sought a fanatic to cloak the point of their purpose in slogans and cant. The man they hired was Karl Marx. Certainly Marx was no worker; he had never soiled his hands with labor. He hated the middle class, which he contemptuously called the bourgeoise, for he considered himself superior in mentality and breeding to what he called “the gross merchants of commerce and exploitation.” He did not attack the waiting despots; no indeed. They were of one mind with him. Rather he proposed in his books and pamphlets the return to government of the total power to exact tribute from the people in order that the government might better direct every phase of the people’s lives, as he asserted, “for their own welfare.” “The elite in turn, would control the governments.

Marx began to accuse the middle class of heinous crimes and aroused the workers against their benefactors. He labored to create envy and malice among the workers – all aimed at the entrepreneurial middle class which had raised them from serfdom, restored their human dignity, and given them liberty for the first time in nearly two thousand years.

Karl Marx was made to order by the self-styled elite. They financed the propagation of his sedition all over Europe and in America. They bled France and Germany with it. They financed sedition in Russia. And the plan began to succeed. By 1910 the Scandinavian countries had already fallen to the Socialism of Karl Marx. Only three nations stood between the elite and their ambitions, the British Empire, Czarist Russia and the United States of America. To a lesser extent, Germany also stood in their way, though Bismarck had greatly succeeded in introducing Socialism there, too. The saving hope was that Germany had a great middle class which the Kaiser honored and supported.

Much is now made of supposed Czarist tyranny. But the fact is that the Czar of Russia had already granted his people a greater measure of freedom. A Constitution had been established and a Parliamentary system. Russia, too, was well on her way to nourishing and encouraging a middle class.

The elitists were anxious to promote the Marxist notion of demanding tribute from the people, for only through forced tribute could freedom be destroyed and the people reduced again to forced labor for the benefit of the elite. Only this could the middle class be eliminated. So, we have Karl Marx’s infamous notion: “To each according to his needs, from each according to his ability.” That is the foundation for slavery and tribute. Marx and the elite had a juicy bait for the workers, who were deluded to envy and hate the middle class which had freed them. If the riches were taken away from the middle class, then the workers would become equals. He called this redistribution of wealth. Not wealth from the elite, with their vast fortunes in every country of the world-inherited fortunes which would not be taxed as income – but wealth from the strong middle class, which would be robbed in the name of the people. Only earned income would be vulnerable to seizure.


But in the way of all this happiness for the conspiring international elite and the slavery of the people, stood the United States, the British Empire, and Czarist Russia. They would have to be destroyed. Britain had only a small income tax, used for the armed forces, for roads, for the maintenance of law and order, and for the payment of a tiny body of bureaucrats who did the paperwork. The nonsense of Karl Marx had made little popular headway in Britain in Russia or in America. The United States, for instance had no income tax at all.

Over and over in America, the elite tried to establish their federal income tax, but they did not succeed. The people were too vigilant, too jealous of their freedom, too proud, too respectful of themselves. They embraced the ancient proverb, “To work is to pray,” and they guarded the fruits of their labors. No, America had no graduated income tax to drain the capital of the hard-working middle class, and so she became strong and rich and powerful, the envy of nations which exacted tribute and forced labor from their people. Attempts were made to exact such tribute from Americans during the Civil War and the war with Spain, but each time the Supreme Court declared that our Constitution prohibited it. As late as 1902 the graduated income tax was again declared unconstitutional, and the Chief Justice observed: “It is a method to enslave our people, and deprive them of their liberty and right to the fruit of their labors.”


The conspiratorial elite fumed. How best, now, to institute their system of tribute and slavery? The solution was war. During wartime governments were better able to tax the people, harnessing their patriotism to maintain enlarged armed services.

And so the elite began to prepare America for war, and conspirators of the French and German and Russian and English elite worked with them – for the destruction of their own nationals, and the elimination, once and for all of the defiant middle class. Again the American elite, under the advice of their brother conspirators in. other nations, proposed an Amendment to the American Consitution, the Sixteenth Amendment – a graduated income tax, just as Karl Marx had proposed. To support this the elite were very busy, through their henchmen, the Socialists and the Populists, and through their secret Communists, in arousing the envy of the workers against the middle class. They told the workers that they would never be taxed, “only the rich” and even then the highest rate would be only two or three percent. And the taxes would go to “our exploited workers” through all sorts of governmental benefits. The unthinking, the envious and the stupid and the malicious, thought this was wonderful. They supported the Sixteenth Amendment, the federal income tax, and it was passed into law in 1913.

Now the stage was set for war, the attack on the British empire, Czarist Russia and the German empire. The major thrust of the effort to destroy freedom of the whole world, and reduce it to total control by the elite, had begun.


The rest is sad contemporary history. Few in America heeded what Thomas Jefferson had said long ago, that when we are taxed on our earned incomes, in our food and our drink, in our coming and going in our property, we would face the return of slavery and the reestablishment an all-powerful and despotic elite. So it is that we of the middle class are being destroyed in an ever-increasing power and despotism of a central government controlled by a conspiratorial elite, and everlasting wars to subdue us and drive us to our knees.

Do not believe for an instant that the world’s conspiring elite in every nation have so much as a serious quarrel among them. They have just one object: control through tribute. Your slavery through tribute, and mine. And they use wars for their purposes just as they use the inequities, harassments, bullying, capriciousness and extortion of their graduated income tax. The system of taxation with which they have yoked us is really forced tribute from the hardworking and especially from the middle class who are slowly being eliminated. The conspirators know that the spiralling payment of tribute will lead to our serfdom and the black night of slavery.

Behind this attack are the self-styled elite, secure in their own power and riches. Most of them have huge fortunes which are tax-exempt. But every man and woman of us – we of the middle class – are taxed in our food and drink, in our property, in our incomes, in our comings and goings. The harder we work the more tribute we have to pay, for the elite are determined that never again will the middle class challenge them and never again will we be able to save money and so rise to power, and never again will we protest the slavery they have planned for us.

But many of us still dare to protest and will continue to do so while God gives us breath. To be effective we know we must direct our attacks on the real criminals, the wealthy and powerful and secret elite of all the world – the conspirators laboring night and day to enslave us. Even our own government is now their victim. For it is the conspiratorial elite who choose our rulers, nominate them and remove them by assassination or smear. I have fought these enemies of liberty in every book I have written. But too few have listened to me, as too few have listened to others who have warned of these conspirators. The hour is late. Americans must soon listen and act …. or endure the black night of slavery that is worse than death.

Peace, Justice, and Economic Reform

Karl FitzgeraldInternationalLeave a Comment

The Henry George Lecture at St. John’s University: March 18, 1997

Nicolaus Tideman

There is a bumper sticker that says, “If you want peace, then work for justice.” At a superficial level, this simple slogan contains an important half-truth. At a deeper level, it contains a more profound half-truth. To understand these half-truths and why they are only half true, we need to know what peace is, what justice is, and we need to understand the relationship between the two. So in this talk I want to explore the meanings of peace and justice, their relationship, and the role of economic reform in attaining both.

“If you want peace, then work for justice.” The more obvious and superficial meaning of this slogan is that people who are treated unjustly will prevent the attainment of peace until the wrongs to which they are subject are righted. Demonstrators shout: “No justice. No peace.” The apparent meaning of peace in this case is tranquility, the absence of strife. And if this meaning of peace is accepted, the slogan is true. You cannot expect to end strife as long as people have unresolved grievances. But the reason that this is only half true is that this meaning is only a shadow of what peace really is.

Peace is more than armistice, more than the cessation of violence. Peace is unity and harmony. In a peaceful world people are all pleased to cooperate with one another. When we have attained true peace, there will be no person who has any purpose that any other person seeks to thwart. In a peaceful world, everyone will feel the truth of John Donne’s meditation,

No man is an Island entire of itself; every man is a piece of the Continent; a part of the main; if a clod be washed away by the sea, Europe is the less, and well as if a promontory were, as well as if a manor of thy friends or of thine own were; any man’s death diminishes me because I am involved in Mankind; therefore never send to know for whom the bell tolls; it tolls for thee.[1]

Is it imaginable that we might ever attain a world where everyone felt so? And if we do so, what will be the role of justice in that world? What is justice?

There are so many conflicting, strident claims for different conceptions of justice that a person might reasonably despair of ever finding a meaning of justice that people would agree upon. Any conception of justice may seem to be no more than one person’s opinion. And yet there are things that we all know about justice. If I tell you that I stand before you as justice, you know that across my face you will find–a blindfold. In my left hand I hold aloft–a pair of scales. You know that in my right hand I have–a sword that I will use if necessary. And my gender is female.

The blindfold, the scales, the sword, and the feminine gender. These features of the traditional symbol tell us much about justice. The blindfold might seem out of place, since it prevents justice from either seeing what the scales say or wielding the sword effectively. But we know that the blindfold has a distinct and essential meaning. The blindfold ensures that justice will not be swayed by any visible characteristics of those who plead before her. Justice is not concerned with whether you are black or white, short or tall, beautiful or ugly. Every person receives the same treatment from justice.

The scales have at least two possible interpretations. The first interpretation is that the disputants at the bar of justice each place their arguments in one of the pans of the scales, and justice determines who has the weightier arguments. Our language supports this interpretation with references to the scales of justice tipping in one direction or another. But there is different use of the scales that is particularly relevant to questions of social justice, as opposed to personal disputes. The scales can be used to achieve an equal division. Justice is done when the contents of one pan of the scales are exactly balanced by the contents of the other. This is the meaning of the scales that I shall apply.

And then the sword. The sword represents the fact that justice is prepared to use the threat of force, and force itself, to see that her decrees are carried out. In a world where men have so often used weapons to achieve selfish dominance, the feminine gender helps make credible the claim that the sword is used only to achieve justice, and not to advance the selfish interests of the person who wields it.

Thus if we know that justice is the blindfolded woman with the scales and the sword, then we know that justice is the principles of equality and evenhandedness that command and prohibit the use of force in resolving conflicts.

Consider what this tells us. It tells us first that if we wish to claim that justice authorizes the force we wish to use, or that justice forbids the force that others wish to use against us, then we must be able to show that our claim is consistent with equality and evenhandedness.

The slogan “might makes right” is an oxymoron, a misuse of language. An autocrat like Genghis Khan who imposes his will on others, without any reference to principles, does not operate in the realm of justice.

Second, the blindfold tells us that we are not in the realm of justice if the principles we offer to explain why our use of force is justified are of the form, “Because I am better than you,” or Hitler’s, “Because Aryans are better than Jews.” Justice compels us to acknowledge the equality of all persons. Claims of individual or group supremacy cannot be accepted by justice.

Third, not only are all persons equal in the blindfolded eyes of justice, but their different goals in life all deserve equal respect. Lenin’s claim that all power should be in the hands of the Central Committee of the Communist Party, because the Party was the unique source of true understanding of the historical dialectic, cannot be accepted by justice. Even if the Party is the unique source of true historical understanding, that is not a sufficient reason to give all power to the party. Justice provides equal treatment for those who wish to pursue lives that are inconsistent with the advance of the historical dialectic. And any other elitist claim that some particular goal provides the basis for favored treatment must similarly be rejected by justice.

Even the utilitarian proposal that conflicting claims should be settled in the way that yields the greatest possible utility must be rejected as an elitist imposition of a particular goal on people who may have other plans. If I choose to pursue a life that can be guaranteed to lead to depression and despair, I have as much claim to the protection of justice in that pursuit as if I choose the path that leads to bliss. Justice must be neutral in its evaluation of people and their goals. As Bruce Ackerman has said in defining neutrality,

No reason [justifying the exercise of power] is a good reason if it requires the power holder to assert: (a) that his conception of the good is better than that asserted by any of his fellow citizens, or (b) that, regardless of his conception of the good, he is intrinsically superior to one or more of his fellow citizens.[2]

If we commit ourselves to neutrality, does that provide a unique definition of justice? No, it doesn’t. There are a number of definitions of justice that might claim to satisfy neutrality, although the claims of some definitions are dubious, and other definitions can be rejected on other grounds.

Consider first the conservative claim that justice is defined by traditional rules. The conservative says, “I don’t say that I’m better than anyone else, nor do I say that my conception of the good is better than anyone else’s. I may not even like what tradition demands. But if you want to be just, you will follow the rules that have traditionally been followed.” I have seen one drawing of justice that reflects this conservative view by portraying justice as a seated woman, with a book in her lap. The book is clearly the received law, the source that justice cites as the foundation of her decrees. But this is not the standard image of justice.

There is an important virtue of conservatism. This is that it eliminates the waste of resources in fighting over who has what rights, the waste from what economists call rent-seeking. Furthermore, there will be some situations where there is no time to secure agreement on anything other than the status quo. Thus there is reason to have at least some element of conservatism in the procedures by which disputes are resolved. But conservatism cannot be the ultimate rule of a just society. It would perpetuate slavery, the selling of daughters as brides, racial and sexual inequalities in civil rights, and every other historical injustice that, through our moral evolution, we have overcome. The neutrality of Conservatism is superficial. Conservatism cannot claim to offer either the evenhandedness that the blindfold promises or the equality that scales require.

Next, consider the claim that justice is defined by what the majority wants. The majoritarian says, “If you want to know who should prevail in a conflict, take a vote.” As appealing as majoritarianism may be on the surface, it cannot provide a coherent theory of justice.

If one wishes to make sense of majoritarianism, one must first specify the perspective from which voters are expected to vote. Are voters to vote as proponents of their selfish personal interests, or are they to vote as disinterested judges of what is best?

Suppose first that voters vote on the basis of their selfish personal interests. Then voting is incoherent as a basis for justice. If voters always vote selfishly, then at any time when you might think that the voting was over, there will always be some measure that can be proposed that will benefit a majority at the expense of a minority, which could therefore be adopted by selfish voting. The process of deciding by voting will never end if any proposal can be advanced at any time and people always vote selfishly. Selfish voting can be used to decide between any two proposals. And it can be used in more general settings if there is some more or less arbitrary stopping rule to keep the process from going on indefinitely. But selfish voting as a general mechanism for determining what is just is incoherent.

Now suppose that voters behave as unselfish, disinterested judges of what is best. In this case, voting as a mechanism for determining what is just is incomplete, because it leaves unanswered the question of what is meant by “best.” Does “best” mean “creates the greatest total utility” or “comes closest to preserving the expectations of the status quo” or “maximizes the rate of growth of the population” or something else? How would you know what best means? If the Supreme Court knows that what is best is what comes closest to preserving the expectations that have developed from our Constitution and traditions, then the justices can employ voting to decide cases and establish new precedents. But to say that what is just is what is voted to be best by unselfish, disinterested judges without specifying what best means is to decline to answer the question of what justice is. Thus neither selfish voting nor unselfish voting serves to define justice, although there can be an element of voting in our efforts to resolve disagreements about what an agreed definition of justice requires in particular circumstances.

If voting cannot be used to define justice, one might entertain the possibility of using a contractarian formulation: What is just is the rules to which people would have agreed if they did not know their personal circumstances. In his 1958 paper, “Justice as Fairness,” John Rawls said,

[Suppose that a group lets] each person propose the principles upon which he wishes his complaints to be tried with the understanding that, if acknowledged, the complaints of others will be similarly tried, and that no complaints will be heard at all until everyone is roughly of one mind as to how the complaints are to be judged. . . . each person will propose principles of a general kind which will, to a large degree, gain their sense from the various applications to be made of them, the particular circumstances of which being as yet unknown.[3]

This is a reasonable recipe for implementing the Golden Rule and a fine idea for seeking agreement about the principles by which complaints shall be judged. If people were to follow this suggestion and achieve the agreement that is described, they would achieve fairness.

However, this does not make Rawls’s suggestion a good way to identify justice. The critical difficulty with his suggestion is that those who mete out justice cannot afford the luxury of securing complete agreement on principles. They must bring their judgement to bear on those who have not agreed on principles. In this context, the closest that a person can come to Rawls’ suggestion is to ask himself, “Are the principles that I propose to apply ones that I would agree to if I did not know how I would personally be affected by them?”

In later writings, Rawls claims that in the original position, people would choose the rules that maximized the well-being of the representative member of the least advantaged class.[4] John Harsanyi, on the other hand, has said that in the original position people would choose the rules that maximized average utility.[5] Someone else might say that in the original position people would choose the rules that provided the greatest stability. How can we know what people would choose?

No matter how a contractarian answers this question, there will be the difficulty raised by Ackerman, in Social Justice in the Liberal State. Describing the attempt to apply the Rawlsian criterion, Ackerman says:

Despite my best efforts, I shall be defenseless . . . the moment I try to make it clear to another person why it is right that I, rather than he, should establish a claim over a disputed thing: I: When I look into myself, I am sure that I would have insisted upon this right as a condition for entering society with you. YOU: You haven’t the slightest idea what you would have insisted on in a presocial state. You’re simply using the idea of a potential entrant as a screen upon which to project the deepest desires of your socialized self. But I too have desires; why should mine be sacrificed to yours? And if you insist, it is possible that I too may delve deep into my psyche and find a transcendent grounding for my desires.[6]

The sword of justice is too momentous to be constrained by only the requirement that those who judge be able to convince themselves that their judgements satisfy principles to which they would have agreed, if they had not known how they would be affected by those principles. The contractarian approach may be a good way to seek consensus. It may be a good guideline for those who are called upon by disputants to arbitrate between them. But it is not a good way to define justice.

Next, consider egalitarianism. The egalitarian says that justice is equality. There is a conceptual difficulty in specifying how beings as different from each other as humans are could ever be equal, unless we create a society where all humans are female clones of one another. (This should be technologically feasible within a few decades, if it is not already.) But I do not think that egalitarians want a society of clones.

Ackerman has offered a suggestion for determining whether any persons among a genetically diverse group are genetically disadvantaged. His suggestion is that, to be genetically undominated, a person must possess a set of abilities that permit him to pursue some life purpose that some persons have, with as much facility as any other person is able to pursue that life purpose. And Ackerman asserts that every person has a right to be genetically undominated.[7]

I doubt that we have the technological capability yet to ensure that every child who is born will be genetically undominated, and until we have that capability and decide to use it, any egalitarian will need to deal with the question of how genetic inequalities are to be rectified.

John Rawls has proposed that the talents that individuals possess be regarded as a common pool, so that anyone who has more than his share has an obligation to compensate those who have less then their shares.[8] Ronald Dworkin has made the contractarian suggestion that people can justly be required to pay an income tax that represents the insurance against being untalented that they would have desired to purchase before they knew what talents they would have.[9]

Dworkin’s acknowledges that his suggestion would not produce equality. If we believe Harsanyi’s claim that people who did not know their personal circumstances would want to maximize their expected utility, then, even in the absence of adjustments for incentive effects, Dworkin’s suggestion leads not to equal utilities, but rather to equal marginal utilities of money, which generally implies unequal utilities when people have different capacities to get utility from money.

Ackerman suggests that each person who is genetically dominated is owed compensation by those who dominate him.[10]

All of these suggestions should be rejected. Talents are not a common pool from which some persons have taken more then their shares. If we are all fishing in the same pond, the quantity of fish that you take will diminish the quantity that is available to me. But the quantity of talent that you have in no way diminishes the quantity that is available to me. Your talent is not acquired at my expense.

From the perspective of peace, no man is an island; each of us is a part of mankind. And any of us who has been graced with an extra measure of talent should recognize that, often, the best use of our talent is to provide for others. Nevertheless, from the perspective of justice, each of us must be allowed to act like an island if he wishes.

Suppose that a bone-marrow transplant from me would save your life–or at least prolong it. And suppose that there is no other person whose tissue type matches yours. Would you assert that you have a right to receive such a transplant whether or not I want to give it? Would you suggest that the sword of justice should be used to force me to give it? An egalitarian ought to be prepared to require me to provide the transplant, for if I refuse I am denying the possibility of continued life to another person, when I have continued life for myself, and the cost to me would be relatively modest.

If you do not mind requiring a bone-marrow transplant of me, then what about a kidney? Suppose that, through no fault of your own, both of your kidneys have failed, and I am the only person who has a kidney that is compatible with your tissue. Would you force me to donate a kidney? And if you call yourself an egalitarian and you would not, then why not? After all, I have two working kidneys and you have none. What could be more equal than requiring us to divide the available working kidneys equally?

If you do not mind requiring me to donate a kidney, then what about my heart? Suppose that I have lived for 50 years and you have lived for only 25. Your heart has been damaged by an illness, through no fault of your own. I have the only heart that matches your tissue, and it would be good for another 25 years. One of us will have to die. Why shouldn’t we put the one available heart in your chest, so that we might divide the available years of life equally between us? A good egalitarian should require me to part with the one available heart after I have had my share of years.

But I don’t think you would. I don’t think anyone would. We are not egalitarians. We recognize the sanctity of the boundaries of the human body. In a peaceful world I will gladly give a spare kidney to anyone who needs it. But in a just world, no one will forcefully extract a kidney from me, even to save someone else’s life. Justice is not egalitarianism.

Just as I own my kidneys, so do I own my talents. In a peaceful world I will use them for the benefit of all mankind. But the sword of justice should not be used to force me to compensate those with less talent. Nor should it be used to force me to abide by the insurance contract that you believe I would have signed, if I had had the chance, before I knew what talents I would have. Nor, in Ackerman’s framework, should I be held responsible for the fact that someone else decided to have a child that turned out to be genetically dominated by me. If anyone is held responsible for the fact that a genetically dominated child is brought into the world, it should be the child’s parents. And if the parents are irresponsible, then the parents’ parents, or the parents’ teachers, should be held responsible.

If would-be parents are too poor to provide for the children that they ought to be able to have, then we should ask whether their parents provided inadequately for them, or whether they were unjustly deprived of resources that ought to have been theirs. But it is not a reason to levy assessments on those who have talent. An egalitarian redistribution to compensate for differences in talent is as unjust as an egalitarian redistribution of kidneys. Egalitarianism is not justice.

A proper definition of justice begins with the principles of classical liberalism. In a just world each person is permitted to determine the purposes to which his or her body is put–the hands and the brain no less than the kidneys. We each have rights of self-determination. This includes the right of ownership of what we produce, at least, as John Locke said, when we leave as much in natural opportunities for others as we appropriate for our own productive activities.[11]

We have the right to co-operate with whom we choose for whatever mutually agreed purposes we choose. Thus we have the right to trade with others, without any artificial hindrances, and we have the right to keep any wages or interest that we receive from such trading.

These components of the classical liberal conception of justice are held by two groups that hold conflicting views on a companion issue of great importance: how are claims of exclusive access to natural opportunities to be established?

John Locke qualified his statement that we own what we produce with his famous “proviso” that there be “as much and as good left in common for others.” A few pages later, writing in the last decade of the seventeenth century, he said that private appropriations of land are actually not restricted, because anyone who is dissatisfied with the land available to him in Europe can always go to America, where there is plenty of unclaimed land.[12] Locke does not address the issue of rights to land when land is scarce.

One tradition in classical liberalism concerning claims to land is that of the “homesteading libertarians,” as exemplified by Murray Rothbard, who say that there is really no need to be concerned with Locke’s proviso. Natural opportunities belong to whoever first appropriates them, regardless of whether opportunities of equal value are available to others.[13]

The other tradition is that of the “geoists,” as inspired if not exemplified by Henry George, who say that, whenever natural opportunities are scarce, each person has an obligation to ensure that the per capita value of the natural opportunities that he leaves for others is as great as the value of the natural opportunities that he claims for himself.[14] Any excess in one’s claim generates an obligation to compensate those who thereby have less. George actually proposed the nearly equivalent idea, that all or nearly all of the rental value of land should be collected in taxes, and all other taxes should be abolished. The geoist position as I have expressed it emphasizes the idea that, at least when value generated by public services is not an issue, rights to land are fundamentally rights of individuals, not rights of governments.

There are two fundamental problems with the position of homesteading libertarians on claims to land. The first problem is the incongruity with historical reality. Humans have emerged from an environment of violence. Those who now have titles to land can trace those titles back only so far, before they come to events where fiat backed by violence determined title. And the persons who were displaced at that time themselves had titles that originated in violence. If there ever were humans who acquired the use of land without forcibly displacing other humans, we have no way of knowing who they were or who their current descendants might be. There is, in practice, no way of assigning land to the legitimate successors of the persons who first claimed land. And to assign titles based on any fraction of history is to reward the last land seizures that are not rectified.

The second fundamental problem with the position of the homesteading libertarians is that, even if there were previously unsettled land to be allocated, say a new continent emerging from the ocean, first grabbing would make no sense as a criterion for allocating land.

It would be inefficient, for one thing, as people stampeded to do whatever was necessary to establish their claims. But that is not decisive because, if we are concerned with justice, it might be necessary for us to tolerate inefficiency. But the homesteading libertarian view makes no sense in terms of justice. “I get it all because I got here first,” isn’t justice.

Justice–the balancing of the scales–is the geoist position, “I get exclusive access to this natural opportunity because I have left natural opportunities of equal value for you.” (How one compares, in practice, the value of different natural opportunities is a bit complex. If you really want to know, you can invite me back for another lecture.)

Justice is thus a regime in which persons have the greatest possible individual liberty, and all acknowledge an obligation to share equally the value of natural opportunities. Justice is economic reform–the abolition of all taxes on labor and capital, the acceptance of individual responsibility, the creation of institutions that will provide equal sharing the value of natural opportunities.

Getting back to where we started, is it true that, “If you want peace– real peace–you should work for justice?” and if so why? Well, it’s half true. To see why, consider what peace is, and how one might create it.

Peace is unity and harmony. Peace is people recognizing that we are all parts of one another, that it is always for ourselves that the bell tolls.

What keeps us from attaining peace? One of the greatest hindrances to the attainment of peace–real peace–is that resistance that so many of us feel to tolerating oppression and injustice. When we know that we, or others we care for, have been treated unjustly, it is ever so difficult to attain a state of unity and harmony with others. The leap to peace is so much easier from a position of justice. So, even though peace and justice are very disparate things, and peace is much the more attractive one, still it make sense, if you want to help people reach peace, to work for justice.

But the reason that this is only half true is that, in fact, justice is not actually necessary to your attainment of peace. If you want peace for yourself, you can have it, at any time, in any circumstances in which you find yourself. Whether you are treated justly or not, you are a part of the being that is all humanity. Each person’s joy is your joy. Each person’s grief is your grief. You don’t have to wait until you are treated justly to see this.

So if you want a peace for others, then work for justice. Work for freedom. Work for the elimination of all taxes on the productive things that people do. Work for equality in the right to benefit from natural opportunities. All these things will make it easier for people to make the leap to peace.

But if you want peace for yourself, simply have it.

1. John Donne, Meditation XVII.

2. Bruce Ackerman, Social Justice in the Liberal State, New Haven: Yale University Press, 1980, p.11.

3. John Rawls, “Justice as Fairness,” Philosophical Review, 57 (1958), pp. 171-72.

4. John Rawls, A Theory of Justice, Cambridge: Harvard University Press, 1971, pp. 75-83.

5. John Harsanyi, “Can the Maximin Principle Serve as a Basis for Morality? A Critique of John Rawls’s Theory,” American Political Science Review 69 (1975), p. 594.

6. Bruce Ackerman, Social Justice in the Liberal State, New Haven: Yale University Press, 1980.

7. Ibid., pp. 113-120.

8. John Rawls, “Distributive Justice,” in E.S. Phelps (ed.), Economic Justice, Harmondsworth, Middlesex, England: Penguin, 1973, p. 338.

9. Ronald Dworkin, “What is Equality? Part 2: Equality of Resources” Philosophy and Public Affairs 10 (1981), pp. 283-345.

10. Ackerman, Op. cit., pp. 132-33.

11. John Locke, Second Treatise of Government, paragraph 27.

12. Ibid., paragraph 36.

13. Murray Rothbard, The Ethics of Liberty, Atlantic Highlands: Humanities Press, 1982.

14. For a concise statement by Henry George, see his Progress and Poverty, Book VII, Ch. 1.

Proposition 13

Karl FitzgeraldInternational1 Comment

Mason Gaffney, Professor of Economics, University of California

What happens when a state radically slashes its property tax?

California can show you 17 years of experience. Here is what has happened since California passed Proposition 13 in 1978.

The obvious direct results have been to cut public services, raise other taxes, and lose credit rating.

Our school support fell from #5, nationally, to #40 in 1985 when last seen, still falling. County road maintenance is down to where my county (Riverside) is repaving its roads at an annual rate of once every 130 years. Once in 20 years is recommended here, and up north you generally need higher frequency. You can’t just build infrastructure and then stop paying for it, it’s a perpetual commitment. Thanks to urban scatter, a high fraction of our population now depends on these county roads.

In 1978 we had a surplus in Sacramento. Since then we have raised business taxes, income taxes, sales taxes and gas taxes, but go broke every June, even as other states are in the black again. Now our State bond rating is last among the states. One of our richest counties (Orange) has gone bankrupt; Los Angeles is on the brink of it, saving itself by closing emergency rooms and hospitals that serve as a last resort for the uninsured poor. We are ill-prepared for Congress’ current move (right or wrong) to shift more functions back to the states.

The private sector fares no better. Raising income taxes, business taxes, and sales taxes is no way to stimulate an economy; each is a drag on work and enterprise. Our income per capita was down from #7 to #12 among the states by 1992, then fell more: from 1992-94, California was one of three states where median household income fell. Our unemployment rate is 9%, 50% higher than the national mean of 6%. Our poverty rate is 18%, compared to 14.5% nationally. That helps explain why the only government function that grows now is building and operating prisons. One of our few rebounding industries is cinema. Another thriving trade is auctioning off used machinery for export to the east.

In 1993 there was net out-migration (including international migration) from this state that has symbolized American growth since time immemorial. It is unheard of: 426,000 people were lost, nearly 2% of the population. This is a watershed change: imagine, of all states California, America’s trend-setter, our El Dorado, The Golden State, our Horn of Plenty, the safety-valve for job-seekers and retirees and entrepreneurs from everywhere, the end of the rainbow, losing population! It’s enough to make a person ask “What are we doing wrong?”.

The fall of our income per capita is greater than appears from the purely monetary measure. Real pay (in constant $) has fallen more, because of the drastic rise of shelter prices. In San Francisco, shelter takes 50% of the median income, with many other cities, especially coastal ones, not far behind. It is unusual to find livable quarters for less than $600/month. The median home price rose 163% during the 1980s, to $258,000 (that is just the median – the mean is higher). These rises are part of the C.O.L. of all renters and new buyers, a part not fully incorporated in standard CPI measures (for various foolish reasons too technical to open up now).

Some cities are in desperate straits. San Bernardino in 1976 was chosen an “All-America City, a City on the Go.” Go it did: today, 40% of its people are on welfare.

California has always been earthquake country, but has always renewed itself, routinely. It was different after the Northridge quake in the San Fernando Valley, January, 1994. This is the upper-middle neighborhood of Los Angeles, but now large pockets of ruined buildings remain, unreconstructed, inhabited only by vagrants and criminals: an instant Bronx West. These blighted sections, ominous portents, spread more blight around them.

It should give one pause. It is, however, if you think about it, the expectable result of what the voters did. They turned property from a functional concept into a sacred one; from a commission to be enterprising, hire people, produce goods, and pay taxes into a welfare entitlement. They rejected the concept of taxing inert wealth in favor of the alternative: taxing liquidity, cash flow, work, production, and commerce. The predictable result is to inhibit economic activity, and encourage holding wealth inert and stagnant

We had a construction boom in the 1980s, but it was not healthy. It was marked by extreme scatter, and extreme instability. Downtown L.A. was to become a great new financial capital, but now has nearly the highest office vacancy rate in the U.S., with of course a high rate of builder bankruptcies. Speculative builders were led on to overbuild, in part, by anticipated higher land rents and prices. This Lorelei effect was magnified by national income-tax provisions, luring on speculative builders, but we have to ask why California fell harder than other states, even with the object-lessons of the oil states in clear view.

David Shulman tersely summarized the distributive effects of Prop. 13 as he left us to become Chief Equity Strategist for Salamon Brothers in Manhattan: “it breached the social compact.” Alienation is the result, and the results of alienation are the Rodney King riots, arson and looting. The Watts riots, you may object, preceded Prop. 13, and you are right.

However, the Watts riots were part of a national epidemic. By 1967 there were riots with arson and looting in 70 or more American cities. The Rodney King riots were endemic to California, and they spread over a much wider area of Los Angeles than the Watts riots did. The looters and arsonists were not all black, and the targets were not all white, but mainly Korean-Americans who just happened to be there minding their stores.

Conventional wisdom now blames our California bust on the end of the Cold War. Surely that is a factor, but as a causal explanation it is too pat, too easy, and too convenient. It shifts the load off ourselves onto impersonal historical forces – the Marxist world view. Let us see if it can survive analysis.

Compare today with 1945.

Los Angeles’ economy depended much more on The Hot War, 1940-1945, than it ever did on The Cold War. Los Angeles’ wartime boom had swelled its population as no other great city, 1940-45. After 1945 the U.S. pulled the plug on defense spending, more than today. Jane Jacobs, in The Economy of Cities, tells us what happened to military spending in Los Angeles after 1945. It lost 3/4 of its aircraft workers, and 80% of its shipbuilders. It lost its military and naval overseas supply and replacement businesses. Troops stopped funneling through. It got worse: petroleum and cinema and citrus, its traditional exports, all declined.

Pundits then forecast a regional collapse, but Los Angeles boomed, instead. The wartime immigrants stayed. They formed creative, innovative small businesses in large numbers, giving L.A. its deserved reputation for having the most dynamic, flexible, adaptable industrial base in the nation. Besides exporting goods, L.A. also became more self-contained, providing itself with more of the goods it previously imported. How could this be? Angelenos had access to land, the basis of all supply and demand in any economy.

1/8 of all new businesses started in the U.S. were in L.A., 1945-50. These were small, creative, flexible, miscellaneous, and too varied and dynamic to classify. No Linnaeus could sort them in static conventional boxes; they were the despair of traditional economic geographers and base theorists, who were at a loss to explain the region’s thriving economy. The new Angelenos stayed and started producing everything for themselves, some things previously imported, and others never seen before.

Eastern firms established branch plants here. Top eastern students came to California’s great university system, and stayed behind to make careers and jobs here, and send their children through California’s excellent public schools. California became famous for supporting outstanding higher education at three tiers, K-12 education, adult education, highways, water supplies, public health, public safety, and other public services, all without repelling business by taxation. There was a kind of regional “El Dorado Effect,” as demand and supply grew together, and growing local demand allowed for economies of scale serving local markets. Food and shelter were cheap and abundant. Land for business was accessible, providing a basis for the whole self-contained phenomenon. A “continental tilt” developed in both interest rates and wage rates, drawing in eastern capital and labor.

Why is that not happening today, 1995? An invisible, pervasive change is Proposition 13, which makes it possible to hold land at negligible tax cost.

In 1945 land was taxed at 3% every year, building a fire under holdouts to turn their land to use. Today that same tax cost is well below 1%. Using Gwartney’s Rule of Thumb (see below under #2,A, “Reassessing Land Frequently”) it is about 1/8 of 1%: a rate of 1% applied to 1/8 of the true value.

Landowners are only taxed now if they use their land to hire people and produce something useful. Then they meet the drag of our high business and employment and sales taxes, necessitated by the fall of property taxes. A handful of oligopolistic landowners control most of the market; small businesses are squeezed out.

This helps us segue from being at the cutting edge of industrial progress to a third-world economy – with little relief in sight.

What was different then? One obvious difference was the lower burdens of sales tax, business tax, and income tax. We had high property tax rates, but they were more focused on land than now, less on new buildings. California was more hospitable to Georgist thinking than perhaps any other state then, shown by its long run of Georgist political action in the prior thirty years. Most people today are totally numb on this subject, which has been blanked out of our history books.

A Brief Historical Review

Several states had “single-tax” movements and initiatives, 1910-14, but most of them petered out. In California they continued through 1924, and then popped up again in 1934-38. In 1934 the “EPIC” campaign of Upton Sinclair included a strong Georgist element – he proposed to set up new factories and farms on idle land. Meantime, Jackson Ralston was pushing a pure land tax initiative, 1934-38.

Sinclair and Ralston lost, but the mere existence of such political action in California, when the movement was torpid elsewhere, tells us a lot. It reveals a large matrix of supportive voters and workers, with effective leaders, to whom politicians (including elected County Assessors) would naturally respond by focusing on land assessments. Politicians survive by accommodating and absorbing dissident movements. Even while “losing,” such campaigns raise consciousness of the issue. Thus, in California, 1917, land value constituted 72% of the assessment roll for property taxation.

This remained the California tendency for years.

California was different. Even into the 1960s, Sacramento County elected an avowed single-tax Assessor, Irene Hickman; San Diego County harbored an active movement for raising land assessments. The Henry George Schools of San Francisco, San Diego, Los Angeles, and Sacramento were the most active such schools in the country: four in one state, when most had none. State Senator Al Rodda, Chair of the Senate Finance Committee, held hearings and tried to push land tax legislation through his Committee in the 1960s and early 1970s. He assigned a staffer, Jack Massen, to spend a year working out the detailed effects on intergovernmental relations. Assemblyman Dr. William Filante, from a base of Georgist support in Marin County, picked up the torch, too.

California displayed amazing prosperity and growth up to 1978. It had the resilience to shrug off the loss of war industries after 1945 and still grow “explosively” (as Jane Jacobs put it). After 1978 we have had, instead, a string of reverses. The timing, along with a priori causative analysis, plus various direct observations too numerous for this time-slot, support an hypothesis that the reverses were aggravated by Prop. 13.

Enforcing good laws we already have

A. Reassessing land frequently

It is important to assess land for tax purposes early and often, especially on a rising market. (Landowners will see to it you do so on a falling market.) Over time, land appreciates more years than not, while buildings depreciate physically every year. Lagging assessments therefore automatically overtax buildings relative to land.

New Hampshire Assemblyman Richard Noyes has circulated data on the effect of reassessment in NH.

The land fraction of assessed value rises each time there is a reassessment. Keene, NH, is in the lead, with frequent reassessments, a high fraction of land in the mix, and a strong track record attracting enterprise and jobs.

In California, where we used to have good assessment, we now have bad assessment legally mandated by Prop. 13. So long as land is unsold, and/or not newly improved, its assessment rise is capped at 2% a year, while market prices soar. Here is one example of the results. This year the Metro Water District of Southern California (MWD) condemned 410 acres for its new Domenigoni Reservoir to expand the system (to accommodate land speculators in the desert boonies). The jury hit them for $43 millions, which works out to about $1.95 a square foot.

The question occurred to me, how does that square with the assessed value for property taxation? I asked Ted Gwartney, a professional appraiser with the Bank of America, to check the assessed value. It is about 7 cents a square foot. The condemnation price, supposedly based on market value, is about 28 times the assessed value.

This is not the result of fractional assessment.

In California we assess property at 100% when land changes ownership, or there is new building. Rather, this is the result of Prop. 13 and its prohibition of market reassessment until land sells.

I thought that was startling, but Mr. Gwartney’s reaction was “Ho-hum, what else is new?” He, who works with such data every day, has a rule of thumb that market land value in California today is about 8 times assessed value. That is important enough to repeat: our assessed land values are routinely at 1/8 of true land value. I wouldn’t dare say that on my own authority, but Mr. Gwartney is here to confirm it. He is a veteran appraiser; for many years he was Director of Assessments for the entire Province of British Columbia.

Does this help you understand why California landowners are now so slow to adapt to new demands, and respond so slowly to the withdrawal of old military demands? In 1945 the assessors were building fires under them, so they sought new uses to meet new needs.

Today there remains a weak incentive to improve to improve property: tax collectors generally cost them money when they make improvements. Sit still, lie low, hire no one, hang on, produce nothing, and your holding costs are negligible.

A little of the old magic lingers. In October, 1995, a 225 acre parcel in Corona, the Chase Ranch, was sold to a builder, Coscan Davidson Homes, for building 967 units. The previous owners, “GGS,” including a Japanese insurance firm, were “seeking a way out. They were behind in tax payments, and GGS was losing its staying power …” quoth Stephen Doyle, spokesman for the buyer. It is that “staying power” that stifles land use and production. Coscan wants to build immediately. Even so, though, they plan to take 5 years to build out the project – if everything goes well. This is the new, post-Prop.13 meaning of “immediately.”

In spite of extreme under-assessment, the assessed value of taxable land in California is 40% of the total real estate value. Imagine what it would be if assessed values were real values, “marked-to-market,” as the law used to stipulate. It would be over 70%, as in 1917. “Staying power” would go down; land use, jobs and production would rise.

B. Using the building-residual method

It is equally important to use the “Building-Residual Method” of allocating value between land and buildings. This means you value the land first, as though it were vacant, based on highest and best use.

You subtract this land value from the total value of land-cum-building as currently improved: the residual, if any, is building value.

Valuing one lot or parcel this way, you have information needed for valuing neighboring and other comparable parcels. Using a map with value contours, you can value a whole city this way with surprising ease and speed.
Using this method, I valued Milwaukee land in 1963 and 1967. The building-residual method nearly tripled the land values reported by the City Assessor, who was using the assessor’s usual inconsistent mix of various other methods. How’s that again? Did I say tripled?

Yes, I really said “tripled.” By his methods, buildings on the eve of demolition were carrying values higher than their sites; by the building-residual method these old buildings had no value at all, which of course is why they were being torn down. Besides depreciation and technological obsolescence, many buildings suffered severe “locational obsolescence,” owing to shifting demand patterns. The land was re-usable, and had as much or more value without the extant buildings.

Using the building-residual method requires no change in present laws. It is within the latitude of assessing officials. These worthies, in turn, respond to public opinion. The conscientious citizens’ move is to raise consciousness and bring pressure, just as the old single-tax campaigners like Jackson Ralston did.

In the process of “losing” they won over half of what they sought, just by taking a stand and making the effort.

C. Federal income taxes

Assessors’ problem today is that the strongest pressures they feel are from owners wanting to allocate as much value as possible to buildings that they may depreciate for federal income tax purposes. Here is where we must study how the parts fit together to form the big picture in the Big Plan we are limning; here is where federal and local tax policies intersect. Some traditional Georgists have neglected or misunderstood the income-tax treatment of land income, to their great oblivion, myopia, insularity, and weakness. Let us see how this works.

Congress and the IRS let one depreciate buildings, but not land, for income tax. This important distinction harks back to when the income tax was new, and Georgist Congressmen like Warren Worth Bailey, from Johnstown, PA, and Henry George Jr., from Brooklyn, were instrumental in shaping it.

When a building is new, the depreciable value is limited to the cost of construction. The non- depreciable land is the bare land value before construction. So far, so good. Over time, however, building owners have converted this into a tax shelter scheme. Owner A, the builder, writes off the building in a few years, much less than its economic life, and sells it to B. “A” pays a tax on the excess of sales price over “basis.” The basis is reduced by all depreciation taken, so any excess depreciation is “recaptured” upon sale. It is defined by Congress as a “capital gain,” and given the corresponding package of tax preferences: deferral of tax, lower rate, step-up of basis at time of death, tax-free exchanges, etc.

Thus far, any tax preference goes to A, the builder, and may be seen as a well-considered building-incentive. Watch, however, what happens next. “A” sells to B, and B depreciates the building all over again, from his purchase price. To do so, B must allocate the new “basis” – i.e. his purchase price – between depreciable building and non-depreciable land.

How shall B allocate the new basis? Enter the local tax assessor. Here is where local assessment intersects with Federal income tax policy. The IRS does not try to assess land and buildings. Instead, IRS instructions tell taxpayers they may use locally assessed values to allocate basis between depreciable buildings and non-depreciable land. The IRS accepts this allocation as conclusive. As a result, local owners of income property press their assessors to allocate as much value as possible to buildings, and as little as possible to land. This does not affect their local taxes, but lowers their federal taxes. It lets them depreciate land.

Assessors don’t care as much as they should: local revenues are not immediately affected. Local assessors have little reason not to accommodate their constituents, local landowners, to help them depreciate land for federal and state income tax purposes. They have little reason to use the correct “building-residual” method of allocating value, and a compelling reason to use the wrong method that understates land value. Thus they convert non-depreciable land value into depreciable building value. It is modern version of “competitive underassessment.” In the process, they also convert the local property tax from a land tax into a building tax.

After a while B sells to C, who in turn sells to D, so each building is depreciated many times. So is a large part of the land under it, time after time, although it should not be depreciated at all. This is carried so far that real estate pays no federal or state income taxes at all, a matter developed by Michael Hudson in his paper for this conference.

The solution to this lies with the U.S. Congress.

The need is to limit depreciation to one cycle only.

It is a most urgent problem for both federal and local treasuries. We all have Congressmen. Write them and raise their consciousness. They are brokers who respond to public opinion, as they should. It is we who are derelict: get on their cases.

Rich and poor

There are rich jurisdictions, and poor. Professor Tideman’s paper in this conference alludes to this matter in passing. Let us support his point with some numbers.

In California, you might think that farm counties like Tulare have a lot more taxable value per capita than cities, but au contraire. Tulare County reports assessed values per capita of $38,100; the whole State averages $60,000 per capita. Suburban Marin County weighs in with $95,400; urban Los Angeles County has $59,000; Orange County has $74,000.

You might also think that Tulare, being rural, has a lot higher fraction of land value in its mix, but again, not so. The Land Share of Real Estate Value (LSREV) in Tulare County is 28%, compared to a statewide mean of 40%, and 47% in Orange County.

Grazing and mining counties like Inyo have high values of LSREV, but they are a small share of the farm economy. Major farm counties with intensive farms, like those of the San Joaquin Valley, have low values of LSREV.

Within counties, disparities among cities and school districts are much greater. In Tulare County, one pathetic little povertyville, the City of Parlier, has just $10,000 of assessed value per capita. Here are some assessed values per capita from different California cities in The County of Los Angeles: Lynwood, $21,500; Beverly Hills, $294,000 (14 times Lynwood); City of Industry, $5,533,000 (257 times Lynwood).

This is why some critics call the property tax “regressive.” It has given some plausibility to the otherwise bizarre claim that switching to a sales tax is less regressive than sticking with the property tax.

Within each city a property tax is progressive, but when your data meld cities like poor little Parlier and Lynwood with Beverly Hills you sometimes find poor people paying more of their income in property taxes than rich people, and getting less for it. Switching just the local property tax to land ex buildings will do little or nothing to correct such disparities, and therefore make little progress toward overall social justice, and the wide support that will evoke. There is, in fact, a natural cap on local property tax rates imposed by local particularism: the City Council of Beverly Hills will not raise taxes in Beverly Hills for the benefit of voters in Parlier.

To avoid such regressivity we must work out some formula for power equalization. The most straightforward formula is simply a statewide land tax.

The above was part of a paper:
Big Plans to Stir the Blood and Steer the Course
delivered by Professor Gaffney at a conference on Land, Wealth and Poverty
at the Jerome Levy Institute on 3 November 1995.