in Old Cities
by Nason Gaffney
Robert Schalkenbach Foundation
Yisroel Pensack gave lavishly of his time, talent and editorial experience to upgrade and clarify my prose. I am also indebted to Robert Andelson, Clifford Cobb, Richard Biddle, Dick Netzer, Jeffrey Smith, Heather Remoff, Daniel Sullivan, Herbert Barry, William Batt, Nicolaus Tideman, Robert Piper, Robert Fitch, Michael Hudson, Joshua Vincent and Ed O’Donnell for editorial and substantive corrections and additions, most of which I have used. My greatest debt is to Mary M. Cleveland, whose holistic mind and conscientious gentle prodding, reaching across a continent, have guided me to integrate the parts into a coherent whole.
I bear sole responsibility for the final product.
New Life in Old Cities
Designed by Lindy Davies
Copyright © 2006, 2014 Robert Schalkenbach Foundation New York City
Tel.: 212-683-6424 or 800-269-9555
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Growth Spurts in Some Other Cities
Nason Gaffney recently retired from
active teaching at the
Prior to Riverside, he was a Professor of Economics at several Universities, a journalist with TIME, Inc., a researcher with Resources for the Future, Inc., the head of the British Columbia Institute for Economic Policy Analysis, which he founded, and an economic consultant to several businesses and government agencies.
His most recent book is The Mason Gaffney Reader: Essays on Solving the Unsolvable. He is also the author of After the Crash: Designing a Depression-Free Economy (2009) and, with Fred Harrison, of The Corruption of Economics (1994) as well as numerous scholarly articles.
Prof. Gaffneys writings on the economics of land, forests, the environment, cities, economic history and many other topics are gathered at his website: www.masongafihey.org.
“History ...is the biography of great men”— Carlyle
Some cities have grown in notable spurts. Some of these cities were new; others have revived after decaying. Cities’ cells, like ours, metabolize and can refresh themselves constantly. Better than our bodies, cities need not die and can continue this cycle of renewal forever, when people remodel buildings and clear and renew sites. Tfhis can happen even after periods of sickness and senility. Given the will, it also takes some skill with public policy. We can observe the skill in the history of growing and reviving cities.
The temper of this study is non-deterministic. True, it deals with economics and numbers and tax policy. It speaks to architects and land and traffic planners, city managers, political leaders, valuers, lenders, welfare workers, epidemiologists, and other urban professionals — practical toilers in the trenches of everyday. It is for self-seeking employees and home-buyers and merchants and manufacturers, with simple motives and narrow outlooks. Yet the evidence keeps bringing us back to the impact of idealistic leaders, and the power of their ideals to move others, prevailing over and working with “destiny” and greed and myopia and technical details.
The study began as a limited look at an episode in New York City, 1920-32. Its leaders executed a Georgist-oriented exemption of new housing from the property tax, while maintaining the tax on land values. There ensued a notable surge in building and population, unmistakably linked to the tax policy. National population data disclosed, however, that New
York was not the only city to have boomed or revived suddenly. What was remarkable about New York, that we should be mindful of it?
Jane Jacobs has pointed out that cities grow “explosively” during periods of special vigor. She brilliantly described the private-sector process of import-substitution. However, she put such an anarchist spin on it she overlooked the positive role of political leaders, and tax and spending policy. When we look, we find that where we observe a high growth rate we also find, more often than not, a Georgist or fellow-traveling movement, Mayor, Council and Governor. We also find ports, parks, public schools, low-fare mass transit, social welfare, public plumbing, bridges and tunnels, public health programs, and so on, making a city attractive for people and profitable for business. We find public works and services provided without heavy taxes on private commerce, labor, and buildings, which also make a city livable and attractive. This was the promise of Henry George, and it seems to have come true in many places during this, the Golden Age of American and Canadian cities.
To the extent that historians have noted this phenomenon it has been one city at a time. Robert Bremner’s title, George and Ohio’s Civic Revival, might give the impression that the action focused on Ohio; publicity about Pittsburgh, and more recently Harrisburg and Allentown, would make Pennsylvania the focus; a study of Henry George’s origins leads us to San Francisco; and so on. But studies of one place at a time mistakenly localize what was a pandemic movement, 1890-1930. George and Georgists influenced tax policy in many other cities than New York, and rural areas too. The signature of their influence is the rate of population growth, reported in the U.S. Census of Population.
Geography and “Historical Laws of Motion” play their roles, and brute economic “forces,” too; but political leaders tip the balance. 'These may be inspirational, analytical, or political. Italy’s Risorgimento, recall, had its poet, Mazzini, its sword, Garibaldi, its composer, Verdi, and its brain, Cavour. We will find their counterparts who led growth spurts, and how they did it, in New York City, Chicago, Cleveland, Detroit, Toledo, Milwaukee,
San Francisco, Vancouver, Portland, Seattle, San Diego, Houston, Los Angeles, and some smaller cities. These are human factors that “cookbook” econometric modeling omits. Modern economics, with its mechanistic tools and canned standard procedures, is the poorer for it. Carlyle’s history as the “biography of great men” (and women) has something to teach us.
To compare one city’s performance with others’ requires a standard measure, preferably simple and unitary. I chose population in part because the measure is readily available. Census data on building, on the other hand, do not go back to the 1920s. Gathering and verifying building records, city by city, would be a major project, not attempted here. Cord, Tideman and Plassmann, and Oates and Schwab, have searched building permit records for various Pennsylvania cities, but the records are non-uniform, hard to interpret, and often inconsistent with population data.
Population growth is not the only goal and measure of civic performance, it is understood. Population, however, is a sign of city health, even from the particularistic local view: a thriving city attracts people, and people, viewed as human resources, help the city thrive. From a larger view, macro-economists understand that the aggregate effect of having cities vie to attract people is not to raise the overall national or world birthrate, but is to make jobs and homes, raise wages, and lower living costs. The converse is also true, with grim results like homelessness and hunger. It is noteworthy that most cities’ growth spurts accompanied provision of vast parks, superior schooling, mass transit, and other such public goods.
Some cities’ growth spurts are complicated by annexations. Chicago in 1889 tripled its land area (Hoyt, p. 153). Detroit quadrupled its area in the 1920s. Columbus’s steady growth is complicated by mergers and annexations that I have not tried to unravel. Milwaukee doubled its area around I960, but lost population anyway. I have adjusted for these changes where I could, or dropped the city from the study.
This research began with New York City, under its Georgist-inspired plan, led by Governor Alfred Smith, to exempt new residential buildings (but not land) from its property tax, 1920-32. The ensuing boom in buildings and population was overwhelming. To get a perspective I tabulated growth rates of comparison cities. New York raced ahead of the nearest comparables, but the data also disclose several other cities with impressive growth spurts. What about them? Aren’t there many other causes of growth?
Inspection revealed the remarkable and telling fact that these spurts occurred under Georgist leadership, too. Some of these cities and periods are Cleveland, 1900-20, under mayors Tom L. Johnson and Newton D. Baker; Detroit, 1890-1930, initially under Mayor, later Governor Hazen S. Pingree; Toledo, 1890-1920, under Mayors Samuel “Golden Rule” Jones and Brand Whitlock; Milwaukee, under “socialist” Mayors Emil Seidel, 1910-12, and Daniel Hoan, 1916-40; San Francisco under Georgist Mayor Edward Robeson Taylor, 1907-09, and consensual “Sunny Jim” Rolph, 1911 -30, spurred by activist James Hartness Jeffes (aka “Luke North”); Los Angeles under siege from socialist Job Harriman; Houston under singletax Assessor J.J. Pastoriza; San Diego under Assessor Harris Moody; and Chicago, 1890-1930. Chicago leadership is more complex, with its host of nationally prominent Georgists and fellow-travelers (John Peter Altgeld, Louis Sullivan, Frank Lloyd Wright, Walter Burley Griffin, Clarence Dar-row, Jane Addams, Louis F. Post, Brand Whitlock, Henry D. Lloyd, Margaret Haley, Edward Dunne, and others). Pittsburgh, known for its Georgist-oriented property tax policy, had a building spurt, but no population spurt, making it an anomaly to be examined below.
Jersey City had a Georgist Mayor, Democrat Mark Fagan, with a redoubtable Georgist Republican mentor, George Record, off and on from 1900-18. They never grew strong enough to beat the railroads or dominate tax policy (Tobin, 1974). Yet it was after Fagan that Jersey City stopped growing, under “Boss” Frank Hague. In the 1920’s, New Jersey specifically rejected a copycat Smith plan (Pleydell, passim).
Vancouver under 8-time Mayor Louis Denison “Single-tax” Taylor went further than any U.S. city in exempting buildings, and grew much faster. It actually quintupled in population, 1895-1909, after exempting first Vi, and then %, and then, for a few years, all of building values from the property tax (Marsh, 1911, pp.33-37; George, Jr., 1911; Rawson, 2000). That is the fastest growth rate on record. Far from blighting Vancouver, it left it probably the most beautiful and livable city in North America, perhaps in the world. Emulation of Vancouver was a common theme in Seattle, Portland, and San Francisco.
There were strong statewide single-tax campaigns in Oregon, led by W. S. U’Ren of Portland, father of the “Oregon System” of Initiative and Referendum, which he pioneered in the hope it would pave the way to the single tax. Losing at the polls did not dispose of the issue or dismiss the protagonists, especially in Portland, where the pro-single-tax vote was always strongest — up to 49% at one point. The campaigns raised consciousness of the issue and gave future politicians a well-defined constituency to “fish” for by bending assessment practices in the Georgist direction. This kind of shading is hard to document, but Professor William McKinley of Reed College told this writer in 1947 that Multnomah County (Portland) overassessed land relative to buildings up to 1941. Politicians troll for the votes of any strong constituency; shading assessments is one way.
In 1912 “the City Council of Seattle, several of whom were singletaxers,” submitted a single-tax amendment to the voters. The Chamber of Commerce weighed in with a proposed 10-year exemption for industry. The voters said no, but at the same time elected a single-tax Mayor, George F. Cotterill (Young, p. 189). We may reasonably surmise that Seattle, with this kind of political and business support, also shaded assessments as Portland did, undervaluing new buildings relative to land.
These were not isolated local events; the leaders networked. In Dunne’s Chicago, the principals “were very conscious of being part of a national movement, and they were in close contact” with Georgist powers in other cities, especially Tom Johnson of Cleveland and Jones of Toledo (Morton, pp. ix, 8). Johnson had been George’s “field commander” (Barker). Mayor,
E.R. Taylor of San Francisco had been close to being co-author of Progress and Poverty. Pioneer land assessor William A. Somers traveled busily on loan from Tom Johnson from city to city, instructing local assessors in his Georgist techniques. Altgeld of Chicago knew and supported George; Purdy of New York had campaigned for George. It is not likely a coincidence that all four of these George disciples or allies presided over cities that grew much faster than most others.
An evidence of early
networking was action at the national level. In 1892 there were six single-tax
Congressmen: Tom Johnson and Michael Harter of Ohio; Jerry Simpson, Kansas;
John de Witt Warner and Charles Tracy, New York; and James Maguire, California.
They managed to help keep land rents in the base of the 1894 Income Tax Act. In
1896, John Peter Altgeld was the brains behind the
fused Democratic-Populist platforms. Charles Evans Hughes nearly became U.S.
President in 1916. Single-tax Congressmen Henry George, Jr., and Warren Worth Bailey dominated the drafting of the income-tax act of
1916 which exempted most labor income and taxed a lot of land rent. Woodrow
Wilson appointed several Georgists to his cabinet,
elevating Newton Baker to national stature as his Secretary of War; and Baker
later came within a hair of being the Democratic Presidential nominee in 1932.
A1 Smith, of course, was the nominee in 1928, even as his
Networking extended to the
fellow-traveling conservation and national parks movements.
served FDR and HST as Secretary of the Interior, 1933-46 — the longest tenure
of a cabinet officer in
I originally limited the
data to U.S. cities in the “Northeast Quadrangle” north and east of Kansas
City, mostly with fixed boundaries, so many stories remain untold or only
briefly told here, of Houston, Vancouver, Victoria, New Westminster, Edmonton,
Saskatoon, Portland, Seattle, Los Angeles, San Diego, California farm towns
like Modesto, Turlock, Fallbrook, Merced, Manteca, Fresno, Lindsay, et al., and
irrigated farming around them under California’s Irrigation District Acts
(Henley; Gaffney, 1969; Rhodes). One “farm town,”
We begin with
* Its name is quite a
mouthful: The Santa Clara Valley Water Conservation District. It is modeled on
a Wright Act Irrigation District, under State Law, taxing land values and
exempting buildings. Attorneys Herbert Jones and Albert Henley modified it to
fit political conditions, as they saw them, around and including
In September, 1920, Governor A1
Smith of New York declared an emergency in New York City, a “housing crisis,”
and called a special session of the legislature to deal with it (Polak, 1924). The emergency was one of wholesale eviction
notices, zero housing vacancies, and soaring rents. Gov. Smith’s message of
The “A1 Smith Act” (as I will call it) exempted new housing construction (but not land values) from the property tax from 1921 until the end of 1931. The property tax rate was around 2.7% of true value, at times up to 3%, making this a consequential matter, especially for dwellings built in the early 1920s which would qualify for up to ten years of exemption. Owing to the time value of money, full exemption for the first ten years of life is worth as much as or more than half-exemption over full life, especially considering that depreciation and obsolescence of buildings lowers their taxable value in later life. Mortgage rates were around 6%, so the tax that was not levied would have added nearly 50% to the financial carrying costs of buildings. With a generous supply of new housing, NYC’s population then grew much faster, even percentage-wise, than that of comparison cities, from 1920 to 1940, and for a while thereafter. See Appendix 3 for city population data, 1890-1998. The data, first gathered for the purpose above, then point us to some other cities with decades of fast growth, which we examine.
1. to refute the “convergence” thesis, which would have all cities becoming more alike, regardless of public policies;
2. to deny the inevitability of “regression towards the mean,” which would have the top city of one generation be replaced at the top in the next;
3. to support a thesis that the 1920 law had the intended effect of reanimating NYC at a time when it would otherwise have stagnated and begun to rot like other older eastern cities;
4. to suggest that cities and states, through their public policies, control their own destinies.
The original stimulus for
this study was a pamphlet by Charles Johnson Post, 1984, How
Post gives no sources for
his data, which stop after 1929. Edward Polak (1924),
Register of Deeds for
Fortunately, we have Pleydell and Wood (1960), a detailed, extensive chronicle
of the legislative history, news reports, and some studies of the results. The
authors make no attempt to organize the materials, except chronologically, or
to interpret or explain them. Pleydell does not make
good reading, therefore, and one doubts if anyone but this researcher ever read
it through; but it is valuable for confirming and supporting, however
tediously, the interpretations given by Geiger, Post, Polak,
Purdy, and others cited. We learn, for example, that in 1923 the Borough of
Brooklyn, alone, led every city in the country in construction (p.3-51). We
learn that the number of new family dwelling units, other than tenements,
produced in NYC rose from 11,000 in 1920 to 36,000 in 1923; while the number of
new family dwelling units in tenements rose from 3,000 to 53,000 (Appendix pp.
20-23. citing 1924 Report of Stein Commission). The most complete source cited
is Leg. Doc 40, Report of the Commission on Housing
& Regional Planning, chaired by Clarence Stein, a prominent
The F.W. Dodge Co. reported monthly on floor space contracted for. This rose from half a million square feet in December, 1920, to 13 million square feet in December, 1923, a 26-fold increase (Pley-dell and Wood, Appendix p.22).
Another source is the
archive of papers of Lawson Purdy, at the Robert Schalkenbach
So I will accept Post’s data, in spite of his shortcomings as a writer. His data seem confirmed by city records, from which he apparently took them. The population changes documented herein track Post’s construction data quite well, adding to his credibility.
Published literature on this episode, either popular or scholarly, is sparse. Here was a major event, in the nation’s biggest city, an event filled with policy implications. The event involved major public and political figures, filled with human interest. The world has not lacked for striving young professionals seeking new research topics. They have selected, all too often, minutiae, or passing fads, or pedantic parlor games, as though they had to fabricate to find worthy subjects. It is a sorrow and a puzzle, but it leaves us with a neglected job to do.
Post sketches the enabling
law (NY State Laws of 1920, ch. 949, section 4-B, and
later amendments). New construction, to qualify, had to be ready for occupancy
None of the sources
adequately emphasize that the law applied not just to the
This more thoroughgoing
“root and branch” attitude in
Who was it that pushed? A
major force was the group of singletax clubs of NYC,
the enduring legacy of Henry George’s runs for Mayor of NYC in 1886 and 1897.
After George’s death, his influence survived him in his
adopted home. “
Those involved in or supporting or patronizing the movement included Gov. Charles Evans Hughes, Wall Street guru John Moody, Senator Tim Sullivan, lender Charles O’Connor Hennessy, and visible reformers like Jacob Riis, Lillian Wald, Frederic Leubuscher, Florence Kelley, Judge Samuel Seabury, and Lawson Purdy — quite a roster, across the spectrum from social reformers to lawyers and conservative lenders, and including one near-miss U.S. President (Hughes), and one visible aspirant (Seabury).' Ben Marsh was ever the dedicated sparkplug and organizer; Joseph Dana Miller the recorder and journalist. In 1912, Marsh got even Theodore Roosevelt to speak for a George-oriented tax change and TR “made a rattling good speech... which got splendid publicity” (Marsh, 1953, p.30). Lillian Wald raised contributions from Jacob Schiff, and the Warburg brothers of Kuhn Loeb.
Before Smith was governor,
York Real Estate Board swayed him against Georgists (Marsh, 1953, pp. 21-22). Perhaps so, but times and people change. Smith turned around after 1911, his change triggered by the awful incineration of 150 people trapped in the Triangle Shirtwaist Company workroom — a traumatic, watershed event of the times. He gave yeoman service on the resulting state Factory Investigation Commission, 1911-15, working with the likes of Frances Perkins and Samuel Gompers.
Perkins and other social workers saw to it that Smith and his cochair, Robert Wagner, got well exposed to sweatshop working conditions and housing (Colburn, p.29). Smith and the social workers warmed to each other (Colburn, p.31). Smith’s base, Tammany Hall, also turned, under the leadership of Charles Murphy, seeking to keep up with Progressive Republican Charles Evans Hughes who won the governorship, 1905-09, by his efforts to improve working conditions. The old “bosses” and the social reformers had something in common: they protected and enhanced the poor, much more so than did elitist “managerial reformers” like Mayors Seth Low and John Purroy Mitchel (Brownell, p.10; Holli, p.169). When first elected governor in 1918, Smith was a changed man with a new power base. We may surmise, also, that his success in reviving NYC helped boost him to the Democratic nomination for U.S. President in 1928, and that was on his mind. Among other things, Smith, a Catholic, had to establish his independence from the Roman Catholic hierarchy, with its anti-Georgist history and mindset (as revealed in its shabby treatment of Fr. Edward McGlynn).
In addition to the A1 Smith Act, Georgist thought and activism had made NYC assessors up-value land in the tax base, and down-value improvements, by recognizing the silent appreciation of land, and depreciation and obsolescence of buildings over time. The leader in this work was Lawson Purdy (Young, p.216; Geiger, p.436;
pp. 582, 590, 623; Marsh, 1911, p.107). Purdy, alawyer, was an
early single-tax campaigner, a young associate of Henry Georges later years,
who soon became President of the Board of Taxes and Assessments of the City of
In form, Purdy’s short
treatise is procedural and administrative, gray and even a bit dull, but it
wastes no words. It is mostly about how to value land, and draw up and
publicize maps of land values used in assessing real estate for taxation. It
draws on and enriches W.A. Somers’ earlier work in
Mayor Tom L. Johnson of
Cleveland, Somers’s boss, had been Henry George’s “field commander” (Barker, passim).
Johnson also became a major power in
Purdy’s treatise tells NYC assessors to value the land first, as though it were bare, and then assign any residual value to the building. “The full value of any building is [only] the sum which the presence of the building adds to the value of the land.” Even a new building, if in the wrong place, has no more than “junk value” (Purdy, p. 13). Today we call that the “building-residual method” of separating land from building value. This vital concept is straight from the single-tax movement, and central to its implementation. (It is also clearly laid out in Alfred Marshall’s Principles of Economics.) Thanks to the concept’s application, the value of land in the NYC tax base considerably exceeded the value of buildings during the Purdy era, coinciding with the period that the A1 Smith Act covered.
NYC, in granting this tax
holiday for new housing, was not “racing to the bottom” in terms of public
spending. NYC financed one of the world’s best mass transit systems, and the
nation’s best city college system (the “poor man’s Harvard” )
with an impressive roster of graduates in the professions. Its parks and
libraries were outstanding; its schools and social services above the national
norm. NYC was not lowering taxes, but shifting them off buildings and onto land
values. Exempting buildings had the effect of raising land prices, thus
preserving and even augmenting the overall tax base. The taxable assessed value
of land in NYC rose steeply under this stimulus. In the
There has been a tremendous increase in land assessments since 1920 in all the boroughs.... The resumption of building has greatly increased the taxable value of the land, which is not included in the exemption.... Tax exemption is creating aggregate taxable values to an extent heretofore unknown in the history of any municipality. (Pleydell, Appendix p. 23, emphasis mine).
The above supports the “Physiocratic Theory ofTax Incidence”
(all taxes come out of rents, or “ATCOR”). There are
several more such statements scattered through Pleydell
and Wood. Purdy cites the New York City Tax Department Report, 1931, pp. 18-19,
showing the assessed value of land by boroughs, 1904-31 (Purdy Papers,
Some might see a kind of parallel here with the “Laffer-Curve Effect” of recent federal finance, where lowering the tax rate is alleged to raise the tax base. Some champions of the A1 Smith Act did advance such a point, arguing that the new tax exempt houses would not even be there if they were not exempted, and they would come on the tax rolls in 1932. The parallel is not very good, and we leave the issue moot here, because it distracts from the larger point that the land tax base rose immediately and hugely. Banker Charles Hen-nessy wrote that the Ai Smith Act resulted in “wild speculation in building sites, immediately reflected in rising prices” (Purdy Papers, 7-7-34). Reinforcing statements are scattered throughout Pleydell and Wood. Federal tax cuts under Reagan also caused steep rises in land values, but Reagan’s policies differed in that they favored land income as much as or more than income from using and improving land, and resulted in deficits. NYC tax cuts under the Al Smith Act applied only to new buildings, and were more than compensated, it seems, by a rise of the land tax base, which NYC immediately tapped for public revenue.
There was more to the Smith Act in practice than meets the eye. Herewith is a summary of its relevant features.
1. Newly built dwelling units were totally exempt from the property tax through 1931.
2. Land was not exempt, either before or after building.
3. Land assessments were kept up to date, using the building-residual method of separating land and building values.
4. All levels of local taxation — city, county, and school district — were under the law.
5. The tax rate was moderately high, around 3%. Public services were maintained at fairly high levels. These included a city college system, and mass transit with low fares.
6. There were dollar caps on exemptions: per room, per family, and per building.
7. Rental units as well as owner units were exempted.
8. The law had to be
renewed annually, both at the State and local levels. It began in 1921, and was
extended in 1922, 1923, and 1924. Each extension covered buildings completed in
the next two years, so buildings completed as late as
9. The law was challenged in court and at one point overturned, but later upheld on appeal. This litigation for a while added to the uncertainty of it.
10. There was a strong base of local understanding and support.
For comparison with NYC, I
have limited the data to cities north and east of
other major cities in NY State:
these influences also reach NYC. From 1920-40, these cities grew by 13.8%, while NYC grew by 32.7%, or 2.4 times as much.
2. Five other major cities
along the mid-Atlantic coast:
Do these facts speak for themselves? Not entirely: a sequence is not always a consequence, and in the multivariate world of economics, “proofs” are always subject to doubt and open to challenge. Certainly, though, the NYC tax holiday was a relevant cause, with an effect expected a priori. The expected events started happening immediately, somewhat as the Dow-Jones jumps when Fed Chairman Greenspan announces an interest-rate cut, but with more lasting results. Anyone questioning cause and effect here should shoulder some burden of proof.
I have also disaggregated
NYC into its boroughs.
The futility of annexation
alone was shown by
NYC tax policy worked in
tandem with related growth policies. NYC in the 1920s coordinated its tax
policy with developing its mass transit system, and holding fares down, much as
It is true, of course, that the “imputed income” of owner-occupied residences is also tax-exempt. There are reasons, however, why this exemption is weaker than that on municipal bonds.
1. The supply of loanable funds is highly elastic, so the income tax on interest income is mostly shifted forward to borrowers in higher interest rates. It is thus only the equity fraction of a home’s value that yields tax-exempt imputed income. New building is heavily financed, especially when the buyers are middle or lower-middle class wage-earners — they have little equity.
2. It is also true that interest paid by homeowners is deductible, seeming to offset the tax-induced interest premium they pay. However, that applies only to owners who itemize; most middle-class wage-earners do not, even today, and certainly did not in the 1920s when most did not even have to file.
3. The homes affordable by the working poor are mostly on cheap land. New homes on cheap land have a high ratio of building value to land value. Yet it is mainly the land or location element in homes that yields imputed true income. The “service flow” from buildings per se is largely offset by depreciation and maintenance and upkeep expenses, and is not net income at all. The unearned increment of the land value under and around a house, which is taxed much lighter than “ordinary” income from labor, comes entirely from the land element. I would be delighted to learn of a single writer on income tax matters who has gotten those points—I know of none.
The upshot of those three points is that income taxation, with exemption of municipal bonds, induces unbalanced urban expansion: too many streets and lots, not enough building to match.
In many cities, like
The Smith Act almost certainly helped cause a number of ensuing events, 1921-40.
1. Building of new dwelling units rose by high factors that can fairly be called extreme and unprecedented.
2. NYC maintained and extended its national lead in population, even in percentage terms. There was no tendency to “converge,” or “regress towards the mean.”
3. NYC continued to grow, even during the Great Depression, when almost every other city of the Northeast Quadrant stopped.
4. NYC supplied housing for the mass middle and lower-middle class markets.
5. NYC land values rose sharply, even though taxation was more focused on land than before.
6. The location of new housing was compact, concentric, and compatible with continued use of mass transit.
7. The flow of capital into public works was matched and balanced by capital going into improving private lands.
8. NYC overcame the relative handicap to growth imposed by the Immigration Act of 1924, and the national stoppage of net immigration in the depression years.
9. NYC grew, 1920-40, in spite of its beginning the period with a higher density than other cities, and not expanding its boundaries.
After 1932 the forces of
tax limitation rallied, financed by the likes of the Rockefeller Brothers, the
Seth Low family, A. A. Berle, and of course several
others. According to Robert Fitch they chose Fiorello
La Guardia as their front man, trusting him to put on a populist charade while
capping their taxes and promoting a 6th Avenue subway line to serve Rockefeller
Center (Fitch, 1985, p. 192). And so
Data in Appencix 3, pp. 54-55, gathered originally for comparison with NYC, also point us to some other cities that grew rapidly during parts of 1890-1940. Some grew faster, percentage-wise, than NYC. What, then, is special about NYC’s spurt? In several of the other cities, rapid growth was associated with Georgist-oriented policies and attitudes similar to those of NYC under its A1 Smith Act, and its Lawson Purdy assessment practices. This supports C. J. Post’s and Geiger’s and Polak’s assertions of cause and effect.
Growth Spurts in some Other Cities
Johnson and Somers analyzed property assessments, and found that assessors had been undervaluing holdings in rich neighborhoods, and overvaluing those in poor. Johnson, a master showman, put up large maps illustrating this, inviting discussion and suggestions from the public. To aid understanding, he pushed “the Somers unit system” — a system later used by Purdy in NYC. A Standard Unit was one front foot, 100’ deep, with formulas to adjust for corner influence, depth influence, etc.
To win support for
up-valuing land and down-valuing buildings, Johnson set up a city-sponsored
Johnson’s City Solicitor
and ally, Newton D. Baker, was another remarkable leader, who later nearly
edged out FDR for the Democratic Presidential nomination in 1932 (Cramer; Neal;
Moley). Baker won the mayoralty in 1911, after an
interregnum of just two years. Baker implemented Johnsonian policies until
President Wilson appointed him Secretary ofWar
in 1916. This high-level appointment recognized the political power of the
single-tax movement in that era, a power that later historians and economists
have wrongly trivialized. Baker left behind an improved infrastructure, and the
city debt that financed it, so the City needed heavy land-value taxes for some
time to come. Peter Witt, often described as “a fiery single-taxer,” ran to succeed Baker and lost only narrowly,
indicating that Johnsonian policies retained a large constituency. After 1916,
Growth after Pingree, however, entailed vast annexations, nearly
quadrupling the City area by 1930. During this period
Appendix 3 shows a
sensational collapse of
Emil Seidel (1910-12) and
Daniel Hoan (1916-40). Hoan’s
tenure was the longest of any Mayor of a large American city; he was nationally
recognized as the best mayor in the country, and
Hoan’s brand of what others labeled
“sewer socialism” consisted in applying the principles of marginal-cost pricing
to Milwaukee’s infrastructure, meaning keeping transit and utility user-rates
low, and meeting deficits by raising property taxes. Hoan
also expanded social services, and pressed city assessors (in
Hoan also took control of
Later Mayor Frank Zeidler (1950-60) was also a “socialist” of sorts, and
well-intended, but without Hoan’s keen mind. He
believed annexation was the way to provide cheap housing for workers so he
annexed all of north-western
The formula for growing and revitalizing cities seems to be the same, whether under a “socialist” like Hoan, a colorful populist like Johnson, a reluctant dilettante like Whitlock, a leading citizen like Purdy, or a lawyer like Clarkson: supply infrastructure, keep user-rates low, raise land taxes, attend to the details of assessment, and go easy on buildings. It is simply the economists’ theory of “marginal-cost pricing” as articulated by Hotelling (1938), and later developed at length by William Vickrey in many books, lectures and articles.
Owing to a perpetual
like few others (Barker, pp. 594, 607, 609).
It was under Governor Altgeld that the Illinois Bureau of Labor Statistics, under
George Schilling, published its famous 8th Biennial Report, 1894,
including comprehensive Lorenz-Curve data on the concentration of landownership
in what is now The Loop of Chicago. At Gov. Altgeld’s
request, Schilling engaged Louis F. Post, leading Chicago Georgist,
editor/publisher, to research the Report (Barnard, p.382). There is no
comparable study, to my knowledge, of another American city. Such support in
John Peter Altgeld, Ida Tarbell (.History
of Standard Oil), Henry Demarest Lloyd (Wealth Against Commonwealth),
Clarence Darrow (Georgist
City Councilman, noted defense attorney and humanitarian), Edgar Lee Masters (Altgeld’s law partner and author of Spoon River
Anthology), Jane Addams (founder and head of Hull House, a leading
settlement house, later a Nobel Laureate), Julia Lathrop (founder of the
Children’s Bureau, U.S. Department of Labor, where she, a Taft appointee, soon
collaborated with Louis F. Post, Ass’t. Sec. of Labor
under Wilson), Louis Sullivan and Frank Lloyd Wright and Walter Burley Griffin
(pioneer creative architects), Daniel Burnham (outstanding city and park
planner), Alexander Stuart Bradley, Kenesaw Mountain
Landis (future baseball commissioner who cleaned up the sport after the “Black
Sox” scandal), Gutzon Borglum
(sculptor of J.P. Altgeld in Chicago and Mt. Rushmore
in SD), Eugene Field (lawyer and poet), John Dewey (educational philosopher),
Margaret Haley (union leader and gadfly of assessments), Thorstein
Veblen (pioneer critic of the mores of greed), Edward
Bemis (expert on utility and transit rates, representing consumers), Louis F.
and Alice Thacher Post and their Georgist
journal, The Public, Gene Debs (labor leader and Socialist candidate for
President), Emil Jorgensen (prolix but effective exposer
of R.T. Ely), Warren Worth Bailey (later Georgist
editor in Johnstown, PA, and then Congressman who led in framing the pioneering
income tax act of 1916), Yachel Lindsay (poet who
idolized Altgeld), Carl Sandburg (liberal and poet),
Florence Kelley (outstanding social worker), George C. Olcott
(publisher of annual land values blue book), Stephen T. Mather
(national parks), Harold Ickes (future Interior
Secretary), et al. Upton Sinclair, a Georgist
fellow-traveler, stayed in Dunne s Chicago long enough to win fame and fortune
with The Jungle in 1906. Two or more generations of Midwesterners
fleeing from small town Babbittry flocked to
Another spinoff was William Kent, with his wife,
(There was no income tax
to deduct it from at that time.) They insisted it be named Muir Woods, rather
than for themselves. A grateful public made
Chicago-inspired export was Clarence Darrow’s friend
James Hartness Jeffes. In
politics, he used the nom de guerre“Luke North.”1
He named his movement “The Great Adventure,” a long series of biennial
single-tax Initiatives that peaked (but did not end) in 1916. North’s base was
Chicago’s consciousness of
land values is shown by its being the only city to have anything like George C.
Olcott’s annual Olcott’s
Blue Book of Land Values, 1910-date. Olcott used
Somers’ methods to appraise a whole city, and later a whole county, every year,
using only a very small staff (including modest Robert King, long-time
supporter of the
Dunne brought in Tom
Margaret Haley was for
t It is reasonable to surmise that skyscraper pioneer Daniel Burnham agreed with Sullivan on this, although I have no direct evidence of it.
battler for honest assessments. She
correctly saw them as a more politically attainable means of raising revenues
for teachers’ salaries than raising tax rates. A Georgist,
she also saw them as a means of shifting the burden off buildings onto land.
She focused her efforts on the
John Peter Altgeld lost as Governor after pardoning three of the
Haymarket Riot “anarchists” for having been unfairly tried. Unbowed by the
hysteria, he returned to
Altgeld died in 1902; Lloyd in 1903. Mayor
Edward F. Dunne, an old Altgeld ally, took over the
It has been alleged that Lloyd clashed with Henry George as being too pushy. Perhaps — there is always some elbowing in politics. But Eugene Staley calls Lloyd “the prominent single-taxer” (Staley, p. 118). Ray Ginger refers to Lloyd as a “single-taxer,” and when Lloyd died in 1903, four Georgists shared the memorial service: Clarence Darrow, Edward Dunne, Cleveland Mayor Tom Johnson, and Toledo Mayor Samuel Jones (Morton, pi2).
Other Dunne supporters in
1905 included Wm. Jennings Bryan, Wm. Randolph Hearst, and Joseph Medill Patterson. Each did so for his own reasons:
self-aggrandizement for Hearst, political gratitude for
Later Mayor William Dever, 1923-27, was Dunne’s protege.
His biographer (John Schmidt, 1989) touts him as “the mayor who cleaned up
Dunne was active through
40 years. Before being Mayor, 1905-07, he was an elected Circuit Judge of
After being Mayor he became Governor, 1913-17. As Governor he had the Legislature make a U.S. Senator out of his old ally, J. Hamilton Lewis. In the 1920’s he was the power behind Senator Lewis and Mayor William Dever, allied by that time with Charles Merriam, Clarence Darrow, Harold Ickes, Jane Addams, Donald Richberg, and other national figures.
Dunne was still active in
Democratic politics at the Convention of 1932. At that point, however, the old
single-tax linkage failed to join him in common cause with A1 Smith and Newton
D. Baker, rival candidates, or with Clarence Darrow
or Jane Addams, both also powers in the convention. Dunne and Ickes both went over to FDR. Judge Samuel Seabury of
When Raymond Moley rose to extraordinary power with President FDR, he
slammed the door on Georgists in
There is no one individual
or organization that symbolizes singletax in
Many cities outside the
northeast quadrant were implementing growth-oriented, George-like policies in
this era. Here is a case study of one,
Born-again San Francisco,
1907-30, makes an edifying case study in regenerative
tax policy. Its calamity of 1906 wiped out most of the city. It had no State or
Federal aids to speak of. The state of
Yet, after the quake and
fire of 1906, San Francisco bounced back so fast its population grew by 22%,
1900-10, in the very wake of its destruction; it grew another 22%, 1910-20; and
another 25%, 1920-30, remaining the 10th largest American city. It did this
without expanding its land base, as rival
How did a City with so few assets raise funds to repair its broken infrastructure and rise from its ashes? It had only the local property tax, and much of this tax base was burned to the ground. The answer is that it taxed the ground itself, raising money while also kindling a new
kind of fire under landowners to get on with it, or get out of the way.
Historians have obsessed
over the quake and fire, but blanked out the recovery. We do know, though, that
Reams are in print about
how Henry George was not elected Mayor of New York, but nothing about how his
colleague E.R. Taylor was elected Mayor of San Francisco. While George was
In 1907, single-tax was in
the air. It was natural and easy to go along with Cleveland, Detroit, Toledo,
Milwaukee, Chicago, Houston, San Diego, Edmonton, many smaller cities, and
doubtless other big cities yet to be researched, that chose to tax buildings
less and land more.
It was the Golden Age of American cities when they grew like fury, and also with grace: “The City Beautiful” was the motif, ex-
pressed in parks and expositions like
It was a jolt to replace the lost part of the tax base by taxing land value more, but small enough to be doable. This firm tax base
also sustained S.F.’s
credit to finance the great burst of civic works that was to follow.
Set against those cities
with spurts of rapid growth there were others frozen in time.
Lincoln Steffens, in his “Tale of Two Cities,”
Mark Hanna of
It went beyond name-calling, and beyond Hanna. “In Cleveland, as in these other (Ohio) cities, there was organized as if by instinct a sympathetic, political-financial-social group whose power and influence made itself known the moment it was touched...” (Hauser in Preface to Johnson, 1911, p. xxii. See Appendix I for the complete quote).
Johnson died in 1911, but
the spirit outlived the body. Singletaxers were hard
at work in the
The population growth
records herein suggest an arresting hypothesis, that
left-wing administrations are good for business — productive business, that is
— and “pro-business” administrations are bad.
has named NYC as the focus of radical politics back to 1820 or so, when it was
emerging as our largest city. During this long growth period after 1820, NYC
government was collecting a large bite from land rents to support public
services (Geiger, p.427). The state, in fact, financed the
Houston, under single-tax
assessor J. J. Pastoriza, grew by some 25%, 1911-15,
until a court ordered him to go back to the old ways (Geiger, pp.434-35).
Harris Moody, assessor in
As documented above,
No one publishing on
One reason for it is that
Another reason for an
exodus is that
A third reason is that the graded tax rate — lower on buildings than on land — applies only to taxes imposed by the City of Pittsburgh, not to the overlapping property taxes of the School District or of the County, Allegheny. The effect on taxpayers is thus heavily diluted, so that many of them are scarcely aware of any two-rate tax plan.
A fourth, and perhaps the
weightiest, reason is the least visible, in normal
times: the City of
Sabre Systems revalued
Scholarly researchers, too, have neglected malassessment, because it is messy, and the modern academic style is to build complex econometric models that are topheavy and fragile, even with good firm numbers, and often impossible when the input numbers are fuzzy. Models are mechanistic and mathematical, with no room for the attitudes and personalities of civic leaders which, as we have seen, make a world of difference. There is wide latitude in the assessment process, latitude that can be used either to subvert a Pittsburgh Plan, or, as in Pastoriza’s Houston, 1909-15, or Harris Moody’s San Diego, 1920-26, to subvert the taxation of buildings and move toward a de facto single-tax regime.8
Population growth is not always a goal of civic policy. Many cities discourage immigration, while seeking to import and retain taxable capital. Federal tax policies of recent times, shifting more and more of the tax burden off property income and onto labor income, have diluted or offset normal local incentives to attract people. Population, however, is surely one measure of city health, even from the particularistic local view: a thriving city attracts people.
From a distributive and full-employment view — the one taken here — it is vital to the interests of labor to have cities vie to attract people by fostering good use of their land. That is, indeed, the main point of Progress and Poverty, George’s major work. Competition for people is also vital to the interests of all people as consumers, especially of housing. In this neo-Malthusian era, it is useful to point out the obvious, that luring people from city A to city B is a zero-sum game, from a national population view. Indeed, luring people from farms to cities generally lowers overall birthrates.
“Labor” as used here
includes most people: everyone except passive-aggressive landowners. As to the
last, however, the rise of land prices in NYC (which C.J. Post and Pleydell and Wood document), and their fall in torpid
cities and neighborhoods, says that landowners, too, gain from urban health and
vigor. As to savers, and active investors in new buildings, and other
productive entrepreneurs, in-terurban competition
tends to raise the marginal rate of return on capital, too. How is all this
good news possible? A healthy economy generates surpluses that belie the
Elizabeth J. Hauser, editing and prefacing Johnson’s autobiography, contributed this insight:
In Cleveland, as in these other (Ohio) cities, there was organized as if by instinct a sympathetic, political-financial-social group whose power and influence made itself known the moment it was touched. It included the banks and trust companies with their directors. Banks that did not sympathize with this conspiracy were coerced by fear into compliance with the will of the stronger institutions. Through the banks, manufacturers, wholesale and retail merchants were reached. Business men who openly sympathized with the low-fare movement were called to the directors’ rooms in the banks and advised, sometimes in guarded language, that their loans might be called or their credit contracted. ... cowed at meetings of the Chamber of Commerce... threatened with boycott. The lawyers were almost a unit. Atone time fourteen of the leading law firms of the city were employed against the movement. Many physicians and in a large measure the clergy were affiliated with this class. ... all who were seeking favor socially, professionally or commercially, lined up with Privilege.
persecution of Mr. Johnson was not confined to
To all of this was added the power of social ostracism. It was carried into the clubs and employed against all who distantly believed in or liked Mr. Johnson.
“For the greater part
of nine years, ’ writes Frederic C. Howe, ‘
(Johnson, p. xxii).
1. Urbanization in the
2. Urbanization revived weakly, 1940-50, but de-urbanization began after 1950 or so, and after 1960 turned into a rout, led by the Interstate Highway System. NYC resisted this 20 years longer than most other cities.
3. Meantime, a new kind of
quasi-urbanization at low densities and high auto-dependency was taking over
the south and southwest, as exemplified by our one data set from there, for
4. New cities have grown
so fast that the minimum population required to be
among the “top 100 cities” keeps rising, decade by decade. Thus
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Classic works by Henry George, historic single-tax materials, and modern scholarly research papers, devoted to the development and application of Georgist social and economic theory, can be read and downloaded free of charge — and books and other materials can also be purchased — from the main website of the Robert Schalkenbach Foundation:
Made in the
Six other cities accepted the option, but I find no record of their experiences with it. I suspect their efforts were blocked by problems of overlapping taxing jurisdictions—problems lacking in NYC, where counties and school districts are coterminous with the city.
Seabury’s Georgist tendencies are cited in Fitch, 1985, p.192; his run at the 1932 Democratic Presidential nomination is in Neil.
This Club, now named
When President Wm. Howard
Taft dismissed Pinchot, he replaced him with
Chicagoan Walter Fisher. Fisher backed Pinchot’s
policies: Taft simply needed someone who was more tactful (Hays). One of
Fisher’s sons, Arthur, had the honor of being dismissed from the University of Montana Law School for supporting the Farmer-Labor Party
(Levine). One of his grandsons, statistician Walter Fisher, had the honor of
being dismissed from
t This was probably to avoid implicating his employer, for he was a working man, a journalist.
Congressman Raker earned infamy from the Raker
Act that flooded out
t In fairness, Taft was a cut above the other two. However, he so alienated progressive Republicans as to split the party, and lose the election of 1912.
In those cities, as in
many other cases, untaxing buildings while uptaxing land resulted in higher land prices. Professor
Robert Murray Haig of Columbia University documented
it in his 1915 Report on The Exemption of
Improvements From Taxation In
To trace this back through the several depressions of the 19th Century, see the 1940 Census of Population, Vol. I, by state. This source gives city populations from 1790-1940. Susan Carter and Richard Sutch’s 2006 compendium ofhistorical data also has this information, updated to 1990.