Why America's Founders Wanted
A Property Tax on Land Value,
And NOT a Sales Tax!
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William Penn wanted to keep aristocrats from grabbing
up land as they had in Europe. He declared Pennsylvania a
"commonwealth" where each landholder would pay a modest
rent that "would put an end to taxes, leave not a beggar, and
make the greatest bank for national trade." The first tax in
Pennsylvania was a land value tax.
Thomas Jefferson also saw that land monopoly made
ordinary Europeans poor, while cheap land made Americans
rich. He also proposed taxes on real estate to prevent land
grabbers from driving land prices up.
Under the Articles of Confederation, the federal government
taxed each state on its land value. Each state would tax each
county, and citizens would never have to deal with state or
federal tax collectors. Our founders did not trust strong central
governments. They believed that people govern their own
communities better than powerful states can govern them.
Tom Paine proposed to give each citizen over 50 an annual
stipend from land value tax for the rest of his life. Paine' proposal
was the first (and probably the best) social security proposal.
The shift to sales and income taxes have helped corporate
conglomerates drive out out family farms, small manufacturers
and local merchants.
Fewer than 3% of the landowners own more than 97% of the
privately held land, including most of the valuable land in central
business districts and at the convergence of major highways.
Land grabbing has driven up real estate prices so much that fewer
people own their homes free and clear than ever before.
Land value tax reduces the tax burden on ordinary citizens
and gives the competitive edge back to small farmers and
small businesses. It makes housing more affordable by driving
speculators out of the housing market. It costs senior citizens
far less than property tax, even without the stipend that Paine
The Boston Tea Party was a revolt against a 3% sales tax on
tea. Sales tax intruded on small businesses while aristocrats
escaped their obligations.
Sales tax still violates personal freedoms our founders held
dear. Business owners have to testify against themselves and
face the "unreasonable search" of sales tax audits because
we have abandoned the founders' tax principles. (Income tax
violates all productive citizens.)
After the revolution, landed aristocrats no longer needed
strong public support. The federal government abolished its
land value tax and instituted a sales tax on whiskey, triggering
America's first tax rebellion.
Ben Franklin complained, "Our legislators are all
landholders, and they are not yet persuaded that all taxes are
finally paid by the land... Therefore, we have been forced into
the mode of indirect taxes."
Pennsylvania's Whiskey Rebels considered the tax "a clever
move on the part of the eastern plutocracy to escape a land tax,
and... reduce [the western farmer] to the economic, political
and legal status of a European peasant." The whiskey tax was
repealed, but the federal land tax was not brought back. After
the Civil War, railroads, oil companies and wealthy easterners
grabbed up most western lands and opposed land value taxes.
Fortunately, local governments and even some states
continued to rely on real estate taxes, causing big landholders
to sell off their holdings. This helped ordinary citizens afford
homes, farms and businesses.
Until the rise of big government, most tax revenue still came
from local property taxes, and most property value was in land.
Today only a small fraction of tax revenues come from real
estate, and most of the real estate tax falls on buildings and other
improvements. Over their lifetimes, home owners pay far more in
sales and income taxes than they would have to pay in land taxes
or even property taxes.
We can protect small businesses, home owners, renters and
especially senior citizens by implementing the founders'
original tax plan, coupled with Tom Paine's stipend for seniors.
Twenty Pennsylvania taxing jurisdictions have
partly shifted their property taxes off improvements
(buildings) and onto land values. Most
home owners in each jurisdiction pay less, particularly
in poorer neighborhoods, and each jurisdiction
saw increased construction while the rest of
Pennsylvania has continued to decline.
Each person aged 65 or over would get a per
capita grant from local tax revenues. If tax rates
have to be raised slightly, younger residents will
still pay less than if sales or income taxes replace
residential property taxes. (Proposed by Tom