By Jens Warming
Reprinted from Political Science Quarterly
Vol. XXXIX. No. 3. September, 1924
The Taxation of Real Property in Denmark
Taxes on real estate are a much more important source of revenue, and especially of local revenue, in England and the United States than they are in continental Europe. In the last few years, however, additional real estate taxes have been much discussed on the continent, and the situation in Denmark at the present time is of particular interest on that account.
Real estate taxes were once much more important in Denmark than they are now. A hundred years ago they furnished almost all the revenue for local expenses, and were an important source of state revenue. At the present time, however, taxes on real property in Denmark furnish only three per cent of the state revenue. (State taxation as used throughout this article corresponds to American state and federal taxation.)
The causes of the development away from the taxation of real property have been in part positive; that is, other taxes have superseded real estate taxes. The power of the government to tax personal incomes has increased to such an extent that it is now natural to raise a large part of the public revenue directly from its ultimate source, the personal income. Furthermore, real estate taxes are not in accord with modern, democratic principles of taxation, especially when they are borne by tenants as an addition to their rent. Modern principles require that taxes should be graduated according to the income of the taxpayer and house rent represents a much smaller proportion of the total income of a rich man than of that of the average, or poor man. Further, according to modern ideas, the state ought to encourage the poor. Finally, the taxation of real property under modern conditions is actually less just than it was in the past.
This is especially true in the larger towns. In the smaller towns of the past there was a certain correspondence between a man’s income and his real property; the great merchant was the owner of much real property for the use of his business and his family; the smaller master-mechanic owned his shop and a little home or perhaps nothing; the official and the retired business man often owned their own homes, and so on. But now the lease system and the mortgage system have spoiled this harmony; now we have great business men without real property, and many other well-to-do people living as tenants; and on the other hand there are owners of large tenement houses so heavily mortgaged that their ability to pay taxes is very small. Ordinary dwellings in Copenhagen (which are nearly always of brick and are rather durable) are mortgaged on the average up to seventy-nine per cent of their total value, and many house owners are retired business men with very little income aside from that received from the houses they own. Accordingly the ownership of real estate, which was in the past a rather good indication of total tax-paying ability, is now a very poor indication. Owners say (and rightly), “If the community wants better schools, cheaper hospital service, public baths, old-age pensions, and so on, then everybody should help to pay for them; we landlords cannot afford to pay new taxes; we can shift them to our tenants only in part, and that slowly; we shall have no way of estimating the cost of maintaining our property if taxes are going to vary up and down and especially if they are going to rise beyond our control.”
There has been therefore a tendency to change the rates on real property as little as possible. They have remained constant either as a certain percentage of the value or as a certain amount per square meter. If a town has inherited high real estate taxes from the past, it is glad to have them, but it does not raise them. The revenue from real estate taxes may increase because of new buildings or because the value of land and buildings has risen, but not because of increased rates, no matter what the financial needs of the town may be.
In the rural districts and the smaller towns the situation as to the ownership of real estate is quite different from that in the large cities. Statistics available on the subject show that in cities with more than 100,000 inhabitants only seven per cent of the total number of flats and houses are occupied by their owners; in towns with from 15,000 to 100,000 inhabitants the proportion increases to twenty per cent; while in the smaller towns with from 4,000 to 15,000 inhabitants, and in those with less than 4,000 inhabitants the proportions rise to thirty-five and fifty-one per cent respectively. It is thus clear that in the smaller places, there is still a good deal of the old parallel between income and the possession of real estate; one half the inhabitants live in their own homes, and as they are, of course, chiefly the more wealthy people, they have the ability to pay taxes as well. Only in the larger cities is the connection broken.
In the country real property taxes are even more satisfactory than they are in the small towns. They amount, in fact, to a kind of progressive taxation. If one farm is twice as large as another, its taxes are also twice as large, but the net income from the larger farm is not twice as great, since the large farmer must share the income from his land with his laborers. The small farmer who can manage all the work himself keeps all the income. If the farmer has one laborer he does half the work himself, if he has four laborers one-fifth, and so on, and even if his own labor is more valuable than that of his helpers, and he alone keeps the land rent, and the interest on the capital invested in the farm, still it is clear that the larger the farm the smaller the net income per acre for its owner. Accordingly the large farmer pays the taxes his laborers would have to pay if they worked on farms of their own, and his real estate taxes have the effect of a progressive tax.
Even in the country, however, the trend is away from taxes on real property. The tendency is clearly seen in the case of parish taxes, which under the Danish tax-system are regulated by the parish councils. These councils choose between real and personal taxes, settling the proportion between them every three years; for instance, of the total amount to be raised, they may choose to take two-fifths in real estate taxes and three-fifths in personal income taxes. When this choice is made, they do not have much freedom, since the law provides in detail how each tax shall be assessed; but the councils are at liberty to decide the proportion between them, and without any theoretical discussion of principles, but simply because of their feeling for what is just and practical, they have chosen year after year to increase the proportion to be furnished by taxing personal incomes, and to decrease that to be furnished by taxing real estate. They have felt that it was unjust to make property owners bear the greater part of the cost of the development of the district. Fifty years ago 75 per cent of the parish revenues came from taxes levied on real estate, twenty-five years ago 60 per cent, ten years ago 50 per cent, and at the present time only 43 per cent. The share of the personal income taxes has thus increased from 25 to 57 per cent, as the result of the decisions of more than 1000 parish councils
The development away from real estate taxes has been especially pronounced in those parishes where a railroad depot has caused the growth of a small town. The situation of these parishes was somewhat improved in 1903 by the passage of a law which provides that taxes on real property shall be assessed on the total value of the property, not as under the old, purely agricultural system, according to the area and the fertility of the land. Under the old system the assessment rates for land in the new towns were the same as those for the farms on which they had been built. As the expenses of the community increased rapidly with the growth of the town, it was necessary to rely more and more on personal income taxes. The law of 1903 was passed to relieve this situation, but the change in assessments was not large enough to make any great difference in the return, and the figures show that the relative decline of the real estate taxes has continued. At the present time the advocates of the single tax are pressing for a return to a tax on land alone, which shall disregard buildings but take into account both the fertility and the situation of the land . This would of course be more acceptable to the parishes with towns than the old fertility system, but it would not be as satisfactory as the method inaugurated by the 1903 law. Such a change would only hasten the movement toward personal income taxes and it is just these that the single-taxers condemn. At the general valuation of 1920 the land value of all Danish farms was fifty-eight per cent of their total value, while the corresponding figure for all other property in the rural districts was only twenty-four per cent. Accordingly a change by which taxes should be assessed on the basis of land value instead of total value, would be injurious to farmers in the parishes which include towns on the railroad lines. Such towns have heavy expenses for schools etc., and a single tax on land values would not provide enough revenue to meet them, even though land values per square meter are much higher in the towns than in the country. Furthermore, the land tax as a single tax would not adjust tax payments according to the personal income of the various taxpayers.
Even as a link in a system taxing all the sources of income (as in the old English state taxation) real estate taxes are unsatisfactory from the modern point of view. Taxation cannot be made progressive when taxes are levied, not on the total amount of the individual’s income, but on its separate elements. There are, however, some very special, though restricted fields where taxes on real property persist in varying forms, and where they may be increased without a new assessment, that is, when a particular piece of property has received some especial benefit. For instance, in Copenhagen there is a tax which is increased by raising the rate, when a private street becomes public and the city pays for repairs, lighting and so on. And throughout Denmark, there is an elaborate system of sewerage taxes and of taxes to be paid by those who profit from the regulation of rivers, from irrigation, dike-building and so on. This is really a compulsory form of cooperation in which the division of expenses among the owners concerned is made according to the benefits they have received. The boards in charge of this system have great freedom in their choice of the basis for division and their methods vary according to local conditions. They take into account the original value of the land as well as the increased value, and the value and extent of the building affected. For instance, they have ruled that since a sewer intended to serve a high building with many living apartments must be larger than one which serves a smaller house, the number of floors shall be considered when figuring the rates. Danish advocates of the single tax are of the opinion that such adjustments would come about automatically if landvalue were used as the basis for tax-assessment, assuming that land values will be higher where one can build tall buildings than in restricted districts where flats are not allowed, or in districts where only low houses are profitable. As a matter of fact, however, there are often both high and low buildings on land of equal value. If the advantages which an owner receives from a public or cooperative enterprise depend more on the size of the buildings than upon the amount of his land, it is only just to apportion the expense according to the size of the buildings. In the case of sewers, water-works, fire-houses and so on, the social bookkeeping of the commonwealth would be misleading if the expense were divided according to land values, since whatever is part of the cost of building or using a house should be borne by the tenants in addition to the other costs of construction. In such cases where individual properties have received especial benefits, real estate taxes are still retained in varying forms, but in general the tendency has been to dispense with them as much as possible.
Meanwhile, however, taxes on income and on wealth have increased and increased. The progressive state income tax exceeds twenty-two per cent in the case of the largest incomes; city taxes in Copenhagen reach a corresponding height and the state progressive capital tax reaches one and five-tenths per cent for the largest fortunes. Accordingly, if a man of large wealth receives only a low rate of interest on his investments (for instance, four per cent) and if he has no income from any other source, there is a theoretical and temporary possibility that his taxes will amount to eighty per cent of his income. And even if the great majority of the population pays at a much lower rate (the writer, for instance, pays only twelve per cent), it is clear that the tax system has become one-sided. Every tax has its defects and the higher it becomes the more they are felt. Especially in the case of the progressive income tax there is the danger that many of the most wealthy will escape the tax through removal, through passive resistance against the assessment, or through positive fraud. The question has therefore arisen whether it is not possible to find new forms of the real-estate tax that will accord with modern principles of taxation.
It may perhaps be wondered that Denmark, having been neutral during the war, should need such high tax rates, and must look about for new forms of taxation. It is, of course, natural that the countries which took part in the war should be in financial straits, but the neutral countries even gained from the war. There have been, however, important changes in Danish public expenditures since the beginning of the war period.
During the war it was necessary to keep a large part of the army in readiness to defend Danish borders, and this caused additional expense, aside from the extraordinary civil expenses which resulted from the increased cost of living, the housing shortage and the war-time unemployment. The annexation of the Danish-speaking part of Slesvig—thanks to the victory of the Allied Powers—also occasioned large extraordinary expense. A more permanent effect of the war and of the social changes which followed it was the inauguration of the eighthour day. This change has added greatly to the regular government expenditures, because there are so many rail roads, gas plants and other public works owned by the government in Denmark. There has also been a democratic revision of the salary system, by which a great number of lower officials have had increases in salary larger than those which the rise in prices made necessary. The system of paying equal salaries to men and women officials is also very expensive, especially in the case of teachers.
Finally, Denmark has a large number of benevolent institutions which entail heavy expenditures, more perhaps than any other country in the world. She was able to afford them before the war because her military expenses were then very small; the expense per capita being only half that of the Great Powers. Danish laws provide for old-age pensions, widows’ pensions, sickness and accident insurance, unemployment clubs and sanatoriums, and the state or the towns bear a large part of the expense—in the case of old-age pensions, the entire expense. The cities have large hospitals which are very cheap and much used, even by the middle class; thus in Copenhagen citizens can use the hospital for thirty cents a day, although the cost to the city is four dollars. The city is regarded as a great “sick-club” to which each member’s dues are paid through taxes. To all this there must be added the expenses of the schools and colleges, although in the opinion of the writer the expenses of the University of Copenhagen should be regarded as productive, since the university enables the government to get officials at salaries lower than those paid in neighboring countries. Nearly all the courses at the university are free and the government grants many scholarships to poor students. University education has become so common that its “marginal utility” is low in business and professional life, as well as in government service. Officials and civil engineers and physicians are cheap.
But to return to the results of social legislation—the system developed since 189I costs large sums of money. The state has taken care of all kinds of need and some critics are of the opinion that it has weakened the general feeling of responsibility among the population. To the expensive system of state aid inherited from normal times is now added the burden of the extraordinary expenses which are the result of the war, and it has been necessary to adopt new forms of taxation to meet them. The state has already agreed on several new taxes, most of them indirect. There are new taxes on the turnover of restaurants, the consumption of chocolate and the sale of shares in limited companies, in addition to higher taxes on beer, spirits and tobacco.
But in increasing local taxation the authorities have, up to the present time, been forced to content themselves with raising income-tax rates. The towns and cities have their share of the expense of relieving sickness, unemployment and poverty in old age and they have no power to levy indirect taxes and are unable to increase the rates of their real estate taxes. They are especially eager, therefore, to find new ways to tax real property, either on the basis of increase in value, or of total present value.
In Germany there is a tax on increase in value (the Wertzuwachssteuer), which is collected when property is sold, and England has a similar tax which is sometimes levied on other occasions. At the present time the German government receives a large revenue from this tax because of the rise in prices. In Denmark, unfortunately, there is no such tax. There is a small tax on increases in value caused by railroad building, but it is difficult for assessors to distinguish between the increase brought about by the railroad and general increases in value, and the tax is unsuccessful. There are besides the sewerage taxes mentioned above, but they are a kind of assessment for improvements.
Ever since the end of the war there has been much discussion of a tax on that nominal increase in property values which is in fact only the result of the decreased value of money, of the inflation, and which affects the land as well as the buildings. (Houses in Denmark are built in a much more durable fashion than houses in America.) As this increase in value is only nominal, one might think that real-estate owners are receiving no taxable profit, for, although they receive more money in rents, they have to pay higher prices when they spend it than they did before the war. Nevertheless their ability to pay taxes has increased, and for two reasons. In the first place, interest on mortgages has increased little, if at all. The resulting advantage to property owners is balanced by the loss to creditors, and from the point of view of absolute justice, a tax should be levied in favor of the latter. Since this would be impractical, the debtor’s advantage represents a large tax reserve for the benefit of the towns. (The fact that most real estate in Denmark is heavily mortgaged has been mentioned before. The mortgages have been in the past a sufficient reason for not utilizing real estate taxes.) The other reason why the rise in prices suggests a tax on real property is that building costs have risen more than prices in general. Therefore, when house-rent has reached the level of present building costs, the receipts of the house-owner will have a greater purchasing power than before the war and he will accordingly have a taxable profit. This increase in building costs is partly a war phenomenon, as the wages of builders and the prices of building materials rose more than other wages and prices during the war period, but there is reason to expect that it will persist, since there was a movement in that direction before the war. Technical progress in the building trades has been slower than in most other branches of industry and it has been necessary to add wage increases to the cost of building, although in many other trades wage-increases have been made possible by the progress of the industry and have not necessitated increases in the price of the product. Further, there is the landlord in the small town which has grown large. The older houses in such places were built at the price-level of the small town, but their value at the present time has risen to the higher price level of the large town (with its higher wages, its raw materials from longer distances, and so on) and there is in consequence an unearned increment for the property owner of the early period.
There has been a strong sentiment in Denmark and in the neighboring countries for a tax on this increment. There have been a great many proposals to equalize house-rents in old and new houses through a tax on the old houses in favor of the new. During the war, when it was extraordinarily expensive to build new houses, the rent of older buildings was kept low through legislation which established “House Rent Boards”. It would be practical, therefore, to attempt some sort of equalization and in the long run it will be necessary, for we cannot have “House Boards” forever. It is just this point, however, which has been fatal to any such tax proposal, for an equalization tax must be accompanied by the repeal of some of the house-rent legislation. The Tenants’ Union was not able to understand that in the long run this tax would be borne by the owners. They regarded it as a house-rent tax and started an agitation against it as an undemocratic measure, harmful to general living standards. This alarmed the politicians and, in spite of the financial needs of the towns and cities, they have not utilized this exceptional tax reserve up to the present time. Perhaps it may be used as an excuse for other taxes on real property.
As a rule the basis for an increment tax is the land and not the buildings, and a land tax probably gives a more uniform public revenue. The land tax is also more satisfactory to tenants, because, if the generally-accepted theory is correct, it cannot be shifted to their shoulders. It must be borne as a capitalized loss by the owners of the property at the time the tax is enacted into law. It is even possible that such a tax would be of positive advantage to tenants if lower rents should be the result of its checking land speculation. Speculation raises prices by artificially withholding land from use, especially in European cities where the flat system prevails. The limit of the speculative price rise is the ability of the public to pay the increased rates, and when six families live one above the other in flats, it is possible to extort more money from them in the form of ground rent that it would be if only one family were occupying the site. The speculator who erects high buildings is able to economize in the items of road, sewers, foundations and roofs, because they are used in common by several families. As a matter of fact, the flat system ought to lower rents, as it decreases the total demand for land, but as it affords the above-mentioned opportunities for speculation, it has been found that European cities with flats have higher ground-rents than cities of the same size with private dwellings only. It would, therefore, be a great advantage to tenants if an increment tax should check speculation.
There is, however, the possibility of shifting the increment tax to the tenant. Generally accepted theory denies that this is possible, holding that the rent given by a tenant for a good location represents its value to him, and that nothing will induce him to give more for it. This is quite true, but the consequences of such a tax may amount to a shifting of the incidence. The hope of profit through an increase in land values is an important motive in many useful transactions, and if buyers did not have this remuneration, then the ordinary profits of such transactions would have to be much larger in order to induce businessmen to undertake land improvement. In all stages from that of a farmer owning land in the neighborhood of a town, to the landlord having flats to let, the hope of increased profit in the future makes the proprietor contented with a smaller normal profit than he would otherwise require. This also applies to the speculator who hold his land for many years without building on it. This practice is often overdone but to a certain extent it is useful, as there might otherwise be erected on land that should have been kept idle, a type of building quite unsuited to the nature of the site. This hope of profit through the increase of land values also animates the speculator for a shorter period, who builds sewers and roads so that prospective house-builders may find grounds ready for their use. This sort of speculation entails quite a good deal of risk and must, therefore, be rewarded by a good profit. This same hope influences builders of houses and owners of flats. All these expect profits through increases in land values, and if they are deprived of such profits by taxation they must be compensated in some other way.
This might be thought of as a kind of shifting of the tax and a good deal of the benefit which should come to tenants from the checking of speculation might thus be lost, but probably not all of it would be. It might even result in discouraging private business from laying out grounds and building houses, and in forcing the community to take up such matters. A long time ago the towns began to buy up land in order to regulate town development and to secure increases in land values, and in the last few years many European cities have also been building houses because of the housing shortage. Nevertheless, it would be a strange thing if a tax reform in the spirit of Henry George should advance the movement toward government ownership and state socialism. Much will depend on the rate of the tax. If only half the increase is taxed, a good deal of private business would probably still go on. There are two possible forms of the increment tax. It may be levied when the property is sold (as in Germany), or on the occasion of periodic valuations. Conservative people in Denmark prefer the first as the less objectionable. The ordinary non-speculative landowner might keep an increase in property values untaxed for years, but unsound speculation would be checked in this way. The conservative element fears the possible inaccuracies of the valuations. Probably the majority, however, prefers the system of periodic assessments as more just and equitable in its principle. It would give the government a more uniform revenue and if the value of property should decrease, it would be easier to reduce this tax. This tax would take the form of an annual payment, while the German form becomes a capitalized tax. The annual payment may be diminished but with the capitalized tax a real repayment must take place, which is more difficult. As to the method of valuation, Danish single-taxers recommend the system of the American, Mr. Somers, and the Central Board of Assessors has conducted some experiments in that direction, but they have been unsuccessful. The tradition of Danish assessors is so high that a mechanical system is unnecessary. The decentralized Danish system may well be continued, modified a little in accordance with the centralized system of Mr. Somers. Of course, the matter of the valuations does present a difficulty. A high tax on a small part of the value of a piece of property may more often be unjust than a low tax on the whole value. There will more often be a disproportion between the tax and the personal fortune of the owner, and if the capitalized value of a piece of land has increased only because the rate of interest has fallen, while the real income has remained the same, there will be no increase in the tax-paying ability of the owner. On behalf of the conservative point of view it must be admitted that it is often hard to require a man to pay an increment tax, who has difficulties of a personal nature or of any other sort in making use of the new value of his property. Such a tax may compel a man to sell the home where he would have preferred to live in quiet for many years. A proposal for a rather high increment tax prepared by the Copenhagen City Council has, therefore, included several paragraphs intended to smooth out these difficulties.
The advocates of the single tax desire a tax on the whole value of the land, not only on the unearned increment, but on the old value as well. In a country like Denmark where real estate taxes are very low, it would be possible without causing too great harm to alter existing taxes so that an assessment of the land value only would yield the same amount as that now paid on both land and buildings. Two years ago the writer served on a Copenhagen committee which prepared the abovementioned proposal for a tax on increases in land values and which considered taxes on total land values. In order to test the effect of taxes on land values only, the committee had a table prepared showing the taxes then in force and the taxes proposed on about one hundred estates situated in all parts of the city and representing all types of land and buildings. A careful consideration of this table showed that if the old real estate taxes (which averaged six-tenths of one per cent of the value) were to be replaced by a tax on land values only, to yield the same revenue as the old tax, or even a little more, few would suffer any considerable loss. Legislators must have the right to bring about reforms even if some few lose in the transition period, for otherwise they would have no freedom at all. Furthermore, special provisions can be made to facilitate the change. (It must be admitted that I have considered here only the immediate effects of the change in the basis of assessment. The chief loss to owners is that house-rent decreases when taxes on buildings are abolished and they must bear the new land taxes as a capitalized loss. The decrease in rent would not, however, appear immediately and during the present housing shortage the transition would be made very easy by the fact that no decrease in rents would occur. Indeed, the Rent Boards would be obliged to allow an increase in rents with the increase in taxes.)
It may, therefore, be possible to transfer the present low taxes from buildings to land, and last summer a small step was taken in that direction by the state, when the land tax was raised from 1.1 per mille to 1.5 and the building tax lowered accordingly. But even the good effects of such a change are relatively unimportant. Danish single-taxers often refer to the prosperity resulting from corresponding reforms in Canada and Australia. It is obvious, however, that the removal of the high building taxes once in effect in those countries would have many more important consequences than the removal of the low building taxes in force in Denmark. It was the removal of the old taxes that brought about prosperity, not the adoption of new ones. I fully agree with the single-taxers that building taxes are bad, but I am not, therefore, bound to admit that land taxes are good.
The question is: “Can new high taxes on land cause prosperity even if they do not replace older bad taxes?” If they can, the change ought to be made, and everything possible done to assist property owners in the transition period. It is not evident, however, that any great prosperity would result from high land taxes either in the cities or in the country. In the cities a high tax on land values would give good results immediately after its adoption, because speculators having large holdings would abandon them and sell the land, and land prices would decrease in favor of building. This would only be the temporary effect, however, and later on the effect would be like that of the increment tax. All stages of the business of supplying the population with houses and grounds would become unattractive to enterprisers.
Danish single-taxers expect that their reform would bring great prosperity to the country. They claim that after the tax had abolished the value of land as such, it would be easier for those who have little capital to get land, and more difficult for people without ability to hold land. It is the opinion of the writer that they are right in both these points, but that the difference would be so small that it would not counterbalance the injury done to the present owners by depriving them of the value of their land.
It was also the expectation of single-taxers in Denmark that a great number of large estates would be subdivided in favor of small farmers and their sons, should land taxes be increased. It is probable that some large proprietors who are farmers simply because they have inherited their property would be compelled to leave agriculture, but all those who are really able to manage a large estate would try to continue to do so, even if deprived of their fortunes. Their work is more valuable in estate management than it would be in anything else, and without their aid it would be impossible to get all the land of the country utilized. Therefore only some few estates would be sold, and those not only in small farms but in tracts of all sizes. It is certainly true that it would be easier to get land without large capital after a tax had taken away land value, and only the improvements must be paid for; but it would be easier to get farms of all sizes, large and small. If the man who could formerly buy ten acres, can buy fifteen after the enactment of such a tax, then the man who could buy fifty acres, can buy seventy-five and the man with one hundred acres can take one hundred and fifty and so on. In buying up the estates, the small farmers would have to compete with many others, and the social consequences of the reform would be small. More far-reaching effects in the direction can only be expected from a progressive land-tax like those in force in some Australian counties. If the tax-rate is higher for the estates than for the small farms, of course subdivision will be accelerated. But Danish single-taxers are men of principle; they advocate equal taxes for equal lands, and condemn all artificial means for equalizing land holdings. There is finally a point in which the writer finds himself in complete agreement with the single-taxers. They claim that the tax on increases in land value should be a local tax, and that on the total value a state tax. This division would be very advantageous for towns and cities since it is there that increases in value are of the greatest importance, but it would also be just, since the burden of high house-rent is borne chiefly by the townspeople, while the burden of land-rent is borne by the whole population through the medium of grain prices. But the fact that the interest of farmers in the single-tax movement has decreased greatly since it became evident that the burden of the land taxes would be heaviest in the country, has already been mentioned.
The single-tax movement has been criticized from several points of view in the course of this article, but it must be admitted that something has been learned from it, and that there will probably be moderate reforms in the future in the spirit of the single-taxers.
Postscript. During my visit to California I found that the price of water in some of the irrigated districts was only two or three dollars an acre, while its value was about thirty dollars an acre (corresponding to capitalized value of $600 plus improvements). This provides a clear basis for a land tax on the unearned increment, but it seems to me that it would be better to tax the water, the earlier the better. If the water really has such a high value, the price should correspond with the value, to make the “social bookkeeping of the commonwealth” accurate, and to stimulate the economical use of the water. It is, of course, taken for granted in making this suggestion that there will in the long run be a scarcity of water in proportion to the land suitable for irrigation. If there is sufficient water for all the land, then the scarcity value is on the side of the land, and it is correct that the land should be high in price, and should be the agent taxed. But if the scarcity is on the side of the water, then its price should be high, and it should be taxed, as its increase in value is unearned.
JENS WARMING UNIVERSITY OF COPENHAGEN
Jens Warming, 9.12.1873–8.9.1939, dansk økonom, kontorchef i Danmarks Statistik 1904-19 og fra 1919 til sin død professor i statistik ved Københavns Universitet. (from lex.dk)
 Revised as to phrasing by Faith M. Williams.
 It must be admitted that this result has some connection with the fact that farmers constitute a majority in the parish councils, but in the opinion of the writer they have not misused their power in local taxation.
 Such problems were at one time regarded as being wholly within the province of the law, but as they actually depend upon the application of the principles of taxation, it is only natural that they were discovered first by tbe single-taxers and later by the economists.
 Next year it will be less, as it will then be possible to subtract taxes from income.
 Professor Warming evidently refers here only to owners of houses built before the war. The man who builds a house at the present time is not receiving the profit of which he speaks.-F. M. W.
 This also applies to the natural and legitimate site rent. The difference in rent between two locations will be greater when several families utilize the good position and only one family the poorer.
 Owners of property in the center of the city (with high site values) and in the most distant suburbs (with low building values) would lose; the nearer suburbs (with apartment houses) gain; but in the center of the city the ability of owners to pay higher taxes would be, in general, good.
 The building tax was not lowered by diminishing the rate, but by subtracting 10,000 Kr. from the buildings on each piece of property. This made the change more acceptable to the farmers than it would otherwise have been. Especially to the small farmers, a 10,000 Kr, difference in assessment is important, although it seems relatively small to the owners of the large tenement houses. Fifteen years ago many Danish farmers, even those of the middle class, were very much interested in the single-tax movement. They expected that the major part of the tax would be borne by the central districts of Copenhagen, not realizing how small these areas are and how high building values are in the tenement districts. However, some sample valuations in selected districts showed the farmers that they would have to pay more of the proposed taxes than of those then in force and many lost sympathy. At the time of the general valuation in 1920 the total value of the land was divided as follows: fifty-eight per cent in farms, twenty-four per cent in other lands in the rural districts and thirty-four per cent in towns and cities. The Wisconsin legislature has discussed (in connection with the Grimstead bill) another modification of the land tax in favor of the farmer, that is, the subtraction of fertility. Danish single-taxers have made no attempt to deny that fertility is a gift of nature as well as the land itself, and it is of course impossible to estimate the value of fertility with accuracy.
The Danish law of 1922 requires that assessments represent the actual value of the land; under certain conditions, however, expenditures for improvements, such as drainage, are subtracted. The surplus value of the small farms presents an especial difficulty. If it were to be taxed, the state would get a share of the surplus value and the small farmer would suffer a special loss. The law has decided that all farms shall be assessed according to the value per acre of the average-size farm (“equal land—equal tax”) and accordingly the surplus value of the small farm is left untaxed. It exists, nevertheless, and nobody protect the small farmer against the high value of the small tracts which is caused by their own competition for the land.
If the surplus value should be taxed, the state would get tbe “rackrent”, and if not, it still exists, and one purpose of the land tax (that land shall be cheaper) is thus not attained. Only an artificial supply of land, like that created by the land laws of 1919 can assist the small farmers in this situation.