Land Value Taxation in Vancouver: Rent‐Seeking and the Tax Revolt

• DOI: http://doi.org/10.1111/ajes.12218
• Published date: 01 January 2018
• Author: Christopher England
• Date: 01 January 2018

Land Value Taxation in Vancouver: Rent-

Seeking and the Tax Revolt

By CHRISTOPHER ENGLAND*

ABSTRACT. At the beginning of t he 20

th

century, Vancouver obtained

international acclaim as a “single-tax” city. Supporters claimed that land

value taxation was responsible for the spectacular growth of the city.

Even critics believed that it had produced a building boom and

declining rents. Yet, over several decades, the system was scaled back

and ultimately ended in 1984. This article argues that the property tax

revolt can be understood with Mancur Olson’s model of collective

action. Property owners are better organized than other parties

impacted by housing policy because they have financial resources and

a salient economic concern in housing. Thus, the special interests of

property owners in higher values and unrestricted use prevailed over

the interests of tenants and prospective buyers. While the property tax

revolt was often articulated in the progressive language of ability to

pay, when confronted with progressive counterarguments, it collapsed

into explicit arguments for rent-seeking.

Introduction

A recent article in the Economist called land valuetaxation “ideal in the-

ory, elusive in practice” (Lucas 2015). The premise that land value taxa-

tion is politically unpalatable is not entirely borne out by the facts. It

has been established in some American cities, much of Western Canada,

Denmark, Germany, Hong Kong, Israel, Estonia, Holland, Australia,

and New Zealand (England 2015). Most of the places that have estab-

lished land value taxation seem to have experienced some of the pur-

ported benefits. Anecdotally, they appear to have well-performing and

*PhD in U.S. History from Georgetown University. Experience includes: fellow at

the Lincoln Institute of Land Policy, instructor at the University of Wisconsin at Madi-

son, and researcher at the Wisconsin Historical Society. Email: Christopher.England@

Wisconsinhistory.org. The research for this article was generously supported by the

Lincoln Institute of Land Policy. The author appreciates the Institute for its support

and its guidance in the development of this article.

American Journal of Economics and Sociology, Vol. 77, No. 1 (January, 2018).

DOI: 10.1111/ajes.12218

V

C2018 American Journal of Economics and Sociology, Inc.

relatively egalitarian economies with high rates of development. Quan-

titative analysis has established more definitively that land value taxa-

tion is associated with higher rates of construction and population

density (Plassmann and Tideman 2000; Cho et al. 2013; Lyytik€

ainen

2009). Yet, despite land value taxation taking hold in several countries,

it has, in each instance, slowly lost ground. Furthermore, the adoption

of the tax has slowed to a crawl since the days when Henry George

inspired a period of globalenthusiasm for it.

To understand the backlash against land value taxation it is worth-

while to consider the question of property tax revolts more generally.

While property taxes and land value taxes differ in important ways, the

average voter often has little or no sense for those differences. Our

understanding of property tax revolts is dominated by California’s 1978

referendum campaign for Proposition 13. This, it has been argued, was

precipitated in part by racial resentment. Furthermore, more accurate

assessment methods accentuated shocks from rapid home price inflation

(Martin 2008; Self 2003). More generally, anti-property-tax sentiment

correlates to racial heterogeneity and often draws on a sense of white

identity that transcends traditional notions of class (O’Brien 2017; Walsh

2016). However, if heightened racial animus and shocks in assessment

spur animosity toward the property tax, they only seem to exacerbate

innate problems. Proposition 13 hardly ended in the racially tinged Cali-

fornia suburbs that birthed it; two-thirds of states subsequently estab-

lished limitations on the property tax. Glenn Fisher (1996) studied the

history of the property tax in Kansas over a century and found that tax

revolts were a routine and periodic feature of state politics. Property

taxes are systematically disliked because of their “salience .” They are

generally paid directly by the taxpayer, ratherthan through withholdings

or indirect collection. Where property taxes are paid in escrow and are

thus less noticeable, opposition is lower (Cabral and Hoxby 2012).

One of the hotly contested questions about the property tax revolt is

the extent to which it can be construed as progressive. Proposition 13

fed into the conservative movement and helped carry Ronald Reagan

to the White House (Nathan 1981). Property tax limitation increased

real estate prices and skewed wealth significantly to whites (Hoyt et al.

2011; Martin and Beck 2017). However, property tax limits were typi-

cally established directly by voters in referendums that gave them

The American Journal of Economics and Sociology60

a populist hue. Some of the earliestadvocates of tax limitation included

labor unions and progressive leaders who argued that the system failed

to live up to the principle of ability to pay. Some advocated replacing

property taxes with income taxes that had a more progressive distribu-

tional outcome. Others argued for adopting “circuit breakers” that

reduced the burden of the property tax on low-income citizens (Martin

2008; Mound 2015; Self 2003.)

The Vancouver, British Columbia example, examined below, reinfor-

ces that ability-to-pay arguments were frequently leveled against the

property tax. However, they were often disingenuous and subtly reac-

tionary. Vancouver is a special case because it had long operated on a

system of land value taxation (LVT) based on the utopian ideas of

Henry George. This created an unusually robust progressive backlash

against tax revolts. Experts provided strong testimony that the burden

of the tax fell disproportionately on the wealthy and that the tax pro-

vided numerous benefits to the community, including lower housing

costs, higher rates of construction, more efficient use of space, better

public services, and greater social mobility. Ability-to-pay attacks on the

property tax wiltedwhen confronted with this opposition. Instead, they

resolved themselves into blunt statements that property rights super-

seded community interests. Robert Murray Haig, one of the leading

spokesmen for the “ability-to-pay” principle, demonstrated that these

reactionary tendencies were baked into his philosophy. Haig’s studies

of LVT in Canada largely confirmed the reputed benefits, but argued

against the tax because owners of property did not always have the liq-

uid assets that would make them “able to pay.” In effect, he opposed

wealth taxes for precisely the reason that Thomas Piketty (2014) argues

for them: they can encourage the redistribution of property when

wealth does not produce enough income to justify its tenure.

I argue that the opposition to land value taxation in Vancouver did

not arise primarily over questions related to its progressive distribu-

tional effects. Instead, it was best characterized by the type of group

behavior that Mancur Olson identified with“rent-seeking.” Olson asked

how it was that in democratic societies most policy decisions favor spe-

cial interests over the public good. He concluded that organizational

group behavior naturally favored small groups skimming money from

larger ones. In a zero-sum game, these small groups would obtain

Land Value Taxation in Vancouver 61