For economist's true believers, a fine legacy has gone astray
How rigidly should the teachings of an all-but-forgotten 19th-century economist be applied at the end of the millennium?
Very rigidly, says a group of avid followers of Henry George, who more than 100 years ago argued that a single tax on land values would lead to economic utopia. And they're taking their case to court.
The group charges that the Lincoln Foundation Inc. of Phoenix, an organization built on Mr. George's ideas, has illegally strayed from his teachings. The foundation is spending $5 million a year "for purposes harmful, hostile and adverse to the Single Tax or which are irrelevant to the land and tax ideas" laid out by Mr. George in his 1879 book Progress and Poverty, the group alleges in a lawsuit in state court in Arizona.
The Wall Street Journal, May 28 1999
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The core of Mr. George's theory is that the value of a parcel of land comes not from the buildings on it, but rather from its proximity to the rest of society. The World Trade Center, for instance, is pricey because it's surrounded by the rest of Manhattan and the roads and services that government has provided. Put the Twin Towers in the South Dakota Badlands and they're not such hot property.
Mr. George argued that the value of the land should flow not to the person who holds the title but to society as a whole. The public can seize that value through a high tax on land values, while leaving buildings untaxed to encourage economic development. That single tax would replace income, sales and other taxes.
A utopian outcome follows: High land taxes would drive down the price of land. There would be no point in underutilizing land in the hope its price would increase, so investors would build more businesses, wages would rise and housing prices would fall, the argument goes.
At issue in the lawsuit is whether the charter requires the foundation to use all its resources to promote the idea of a single tax. Behind the legalities is a dispute between hard-line George devotees, for whom the single tax has an almost religious appeal, and those who admire Mr. George's thinking but believe it unrealistic and unwise to eliminate income, corporate and sales taxes in favor of a tax on land values.
'It's the Same Thing'
"It's like if you have a Knights of Columbus chapter and the people in charge don't believe in Christianity -- it's the same thing," says plaintiff Stanley Sapiro, an 81-year-old former insurance industry attorney who became a George devotee in 1940 after stumbling upon a book about the economist.
It's not the same thing, counters Rep. Earl Blumenauer, an Oregon Democrat who is named as a defendant because he sits on the board of a foundation-funded research organization, the Lincoln Institute of Land Policy Inc. "Today, when people have their personal wealth held in many different forms, some tangible and some intangible, I think that the focus on a single item to the exclusion of everything else probably is a view of the world that nobody would subscribe to."
To force the Lincoln Foundation back into the fold, Mr. Sapiro initiated the suit against the foundation, the institute and dozens of associated individuals. The plaintiffs -- 20 individuals and organizations -- want the court to dismiss the officers and directors and to insist that foundation resources be used to promote the single-tax idea.
"Our main purpose is to stop their sabotaging the Henry George movement all over the world and to get them to make an attempt -- even a feeble attempt -- to teach and espouse the thinking of Henry George," says Mr. Sapiro. "They take the position that we shouldn't advocate the single tax or people will think we're a bunch of kooks."
Foundation and institute officials deny that they've abandoned Georgist thinking or violated the foundation's charter. The foundation, they say, supports research into land and tax issues covered in Mr. George's work; the institute carries out the research and sponsors conferences, but doesn't advocate particular policies.
"There's clearly a disagreement about the narrowness or breadth of the views of Henry George as expressed in Progress and Poverty," says Patricia Refo, the foundation's lawyer. "But the foundation has been and remains true to its charter."
Cleveland industrialist John C. Lincoln endowed his foundation in 1947 to "teach and expound the ideas of Henry George." The plaintiffs say it has $175 million in assets; the foundation won't say if that's so.
Just this week, the Lincoln Institute co-sponsored a conference that included discussion of "use of tax instruments to recover for community benefit some portion of the increase in land value following public investment and growth." But it also touched on taxes on buildings, a policy anathema to hard-core Georgists. "As far as we're concerned, they're shying away from the mission of taxing land to the exclusion of everything else," says Josh Vincent, executive director of the Henry George Foundation of America, in Columbia, Md., one of the plaintiffs.
"Had Henry George been living today in the era of the Internet and virtual companies, when we're looking at whole different ways of creating wealth and value for consumers, I think it may have profoundly affected his thinking," says Rep. Blumenauer, the Lincoln Institute board member. "But in my mind, despite the fact that the world has changed, there is an important role to be able to understand what impact land value has in the mix that we have today."
Although there are Henry George advocates today in New York, Chicago, San Francisco, Australia and, more recently, Russia and Estonia, his popularity has undoubtedly waned with the decades. "I don't think his message persisted into the 20th century," says economist Robert Heilbroner, author of The Worldly Philosophers: The Lives, Times and Ideas of the Great Economic Thinkers.
The plaintiffs, of course, dispute that. But they acknowledge the quixotic nature of their quest. Only 16 U.S. municipalities, one downtown improvement district and one school district -- all in Pennsylvania -- have tilted their property tax policies toward land-value assessments, says Steven B. Cord, a former director of the Henry George Foundation of America.
"It has been uphill work to get these 18 jurisdictions to come our way," reflects Mr. Cord. "What can I say?"
For 100 years, America's landed information industry (universities,
newspapers, etc.) has been trying to thwart public understanding of
Georgism (see The Corruption of Economics, Sheapherd-Walwyn,
1994). This is an example from The Wall Street
Journal, May 28 1999, by courtesy of