Contra Watling on "The failure of the land value tax"

There are many successful examples of land valuation and land value taxation, which critics don't engage with.

Andy Burnham, mayor of Greater Manchester and widely seen as a potential challenger to PM Keir Starmer from within the Labour party, has been making a lot of noise lately about how land in the UK is significantly “undertaxed,” thereby bringing Land Value Tax (LVT) back into the UK news cycle.

From the linked FT article: “At the launch of his by-election campaign on Friday, Andy Burnham said he was keen to reform ‘highly regressive’ council tax © Temilade Adelaja/Reuters”

I haven’t formed any opinions yet about Mr. Burnham or the finer details about his specific policy designs, but I do have an opinion about something else that regularly makes the rounds on social media whenever LVT makes headlines in the UK: Sam Watling’s article in Works in Progress magazine from last March, “The failure of the land value tax,” frequently invoked on social media as a slam-dunk refutation of any proposed LVT reform in the UK, and indeed, anywhere else.

Watling’s article recounts the rise and fall of the 1909/1910 “People’s Budget”, which included an aggressive push for Land Value Tax under the British Liberal party that ultimately failed. From this one historical case study, Watling draws the broad conclusion that LVT was not just an ineffective policy, but an actively dangerous one.

I will happily grant Watling’s first premise, that Lloyd George’s Liberal party failed to enact an effective and lasting Land Value Tax in the UK in the 1910’s, but my agreement with Watling ends there.

Watling’s argument is that the LVT implementation was botched, not because it was implemented poorly, but because “pure land value tax is chimerical” and therefore can’t be implemented. He goes on to assert falsely that “a pure tax on the unimproved value of land has never been successfully implemented anywhere.”

There are three major issues with Watling’s argument: first, he over-generalizes from one century-old anecdote to make provably false claims about all LVT implementations everywhere. Second, he glosses over the intense historical and political turmoil that afflicted Britain in the 1910’s and makes little effort to untangle these confounding forces with the LVT he seeks to pin all the Liberals’ failures on. Third, he zeroes in on the “utopian” maximalist goals of historical LVT advocates as a convenient target, and then expects the audience to simply assume this has much to say about modern LVT reforms, which are centered around much more modest and pragmatic, incrementalist reforms like split-rate property taxation.

As fellow substacker Darren Iversen has already written a corrective to Watling’s historical claims, we will focus our efforts on the economic ones.

Watling’s Two Pillars

To the extent Watling makes general claims about LVT, rather than historically contingent complaints about the Liberal’s specific 1910 implementation, the argument seems premised on two basic pillars:

1. Land value is practically impossible to define and assess

2. Pure LVT has never been successfully implemented anywhere

Even if we granted him everything he has to say about the People’s Budget, these pillars would still collapse under their own weight. The failure of one specific LVT implementation in one specific place at one specific time is simply not enough evidence to draw strong universal conclusions from. This is especially clear when we look at the many successful historical examples of land valuation and land value taxation, many of which occurred at the same time as the UK LVT. Watling mentions none of them.

Howdy!

Pillar 1: Land valuation can’t be done

Watling doesn’t assert that land valuation is fundamentally impossible, but he draws from the People’s Budget to strongly imply it:

The definition of land value was impossible to ascertain properly and became bogged down in court cases. When it could be collected, it proved so difficult to implement that administration costs were four times greater than the actual tax income. Instead of increasing the efficiency of land use, it became a punitive tax on housebuilders, cratering housing production.

It’s undeniable that the UK Liberals’ bungled this operation (with plenty of help from their enemies, the landed gentry), but Watling goes too far to generalize from this one failure, especially because we have so many other successful examples to learn from. Notably, there are no less than four different ways to credibly value land, all of which have been tested and subjected to actual real world administrative scrutiny. Two of these methods were even employed in successful Land Value Tax regimes during the exact time period as the Liberals’ LVT. Watling mentions neither of them.

Method 1: land value zones, or the “Least You Can Do” method

The first method was used during a period that overlapped the UK People’s Budget, and was in fact used to support a “pure” Land Value Tax (no tax on buildings). This was in the German colony in Kiautschou Bay/Qingdao, China, which relied on a pure LVT for sixteen years, from its founding in 1898 until its conquest in 1914 by Imperial Japan. Qingdao fell short of a maximalist “Single Tax” (in which LVT would be the one and only tax), but there was genuinely no tax on buildings, incomes, or corporations. Additionally, the LVT itself was set at a whopping 6%.

The colony enjoyed rapid growth and was widely hailed as a success, with credit given directly to its innovative Land Value Tax system. If there was ever a relevant historical example to directly compare against 1910’s Britain, it would be this one. Watling does not mention it.

The curious case of Qingdao, China's land value tax

The actual land valuation method employed in this successful historical experiment turns out to have been surprisingly simple; administrators carved up the territory into distinct regions with a fixed land value rate per unit of area that broadly tracked market behavior, with regular reassessments every few years. You can see an example of a historical land value map here:

The key insight behind this method is that the most important thing is achieving the incentive effects of Land Value Tax. Within this frame, achieving broad accuracy and local uniformity is what matters most, not an arbitrary degree of precision. We have written up an adaptation of this method for modern practitioners which we call the “simplest viable” or “least you can do” method for valuing land, which you can read about here:

Valuing Land: The Simplest Viable Method

One could argue that such a simple method cannot work in theory, but such an argument must answer for why it worked in practice, and why it produced the effects that LVT theory predicts. One could also argue that the comparison is simply irrelevant; the colony was tiny and young, the colonial overlords could ram through whatever policy they wanted, and even if one were to grant that this land valuation method happened to have worked in this one case, it could never scale or stand up to widespread valuation protests.

All of those objections are answered by the next historical valuation method, which was deployed in large cities and was in use for more than fifty years. Watling does not mention it.

Method 2: The Somers System

The Somers system was a fascinating historical land valuation method that was used for valuing land for both land value tax and conventional property tax purposes alike in dozens of American cities, during a time period that cleanly overlapped the People’s Budget. Like all other land valuation methods, the Somers system generated land values entirely separately from building values, but was also uniquely designed to generate widespread communal and political buy-in from the very start. This is relevant to Watling’s additional argument that land valuation is too politically controversial to withstand public scrutiny:

How Georgists Valued land in the 1900's

What was the Somers system’s secret? They just asked people what the land values were. However, instead of mailing out forms and having people self-assess their own land values, the process was done communally. Somers system facilitators gathered locals into a series of town hall meetings and had them work out their local land values together. Attendees would argue back and forth until consensus was reached, with the facilitator recording the community’s decisions on a large map. This process reversed the order of how valuations are done today, with community input and protest occurring before valuation, not after. Because values were decided upon by local communities rather than imposed from on high, there was much greater trust and support in these values.

This system was used in various cities throughout the US from 1896 until at least 1947, a period spanning over 50 years, and was used in many large cities in one form or another, including Houston, Chicago, New York City, Philadelphia, Baltimore, Cleveland, etc., in support of both land value taxes, as well as conventional property taxes.

Those are just two particularly noteworthy historical methods, whose tenure directly overlapped the time period Watling describes. We also have modern ones which are perfectly adequate.

Method 3: How appraisers value land right now

Many local government property appraisers in the USA and other countries are more than capable of valuing land separately from buildings, credibly and reliably, on a regular schedule, all while subject to administrative oversight and taxpayer protest. This is not because modern land value tax regimes are common, but because land valuations are a fundamental component of the most common mass appraisal method used for conventional property tax valuation, the Sales-Adjusted Cost (SAC) approach. Watling does not mention it.

In the SAC approach, one must reconcile depreciated building replacement costs for any given property with comparable market sale prices for the same. To do this properly, an assessor must produce market-calibrated land tables and locational premium adjustments, which is to say, land values.

Not every assessor is perfect and experience, training, and data quality vary widely across jurisdictions, but the best assessors employing the SAC approach produce credible land value estimates entirely separately from building values, even if their local government doesn’t necessarily care about land value for tax purposes. As we have already seen, the results don’t have to be perfect, just good enough, baking in broad accuracy and local uniformity for similarly located land of similar class, size, amenity, zoning, and local influence.

If you’d like to learn more about the SAC approach, we describe it in detail in an interview with a North Carolina appraiser with decades of experience who has worked on all sides of the property appraisal industry, both public and private:

How Appraisers Value Land

Method 4: Copy South Korea’s Homework

South Korea does not have an LVT, but what they do have is arguably the most advanced land valuation system in the entire world. South Korea values all the land in the entire country down to the individual parcel, annually, and gets this entire operation done in five months flat. Importantly, it is specifically land value, not building value or total value, that is produced by this method. Watling does not mention it.

Our article on the subject goes into great detail about how the Ministry of Land, Infrastructure, and Transport (MOLIT) orchestrates this annual event efficiently and effectively, in concert with local and regional governments:

How to Value Land: Korean style!

The short version is that the national government is responsible for setting the land values for some ~500,000 “standard parcels” which are carefully selected in advance for special attention. In all but exceptional circumstances each of these standard parcels is given no less than two independent hands-on appraisals¹, which are later reconciled into a single official land rate for that parcel. Local and regional governments go on to value all the other parcels in their local area by using the “standard parcels” as reference anchors. This simultaneous top-down and bottom-up whole-government collaboration ensures that centralized enforcement of standards, consistency, and equalization is properly balanced with local knowledge and expertise.

Standard parcels in Seoul, marked in magenta. Generated by me in QGIS from South Korea’s public data

Additionally, all the land values are fully public and accessible through API. All of those land values on a free, publicly accessible website, landforall.kr, that maps the entire country down to the individual parcel:

The site’s maintainer is also working on a 3D version, which is particularly evocative:

Land valuation is not some mysterious or impossible task, and there are plenty of robust historical and modern precedents. Watling does not mention them.

Having knocked down the first pillar, we now move on to the second.

Claim 2: Pure LVT has never been successfully implemented anywhere

Watling claims:

Pure land value tax is chimerical. Those countries that raise substantial amounts of tax from land, such as Japan and the USA, do so through taxes on property, as Britain did before David Lloyd George. A pure tax on the unimproved value of land has never been successfully implemented anywhere.

“Never” and “anywhere” are bold claims, easily disproved by evidence.

Let us take care that we align with Watling’s definitions. He says a “pure” tax on land, which he defines simply as a tax on “the unimproved value of land” (and therefore not on the buildings). It seems clear he is not using this term to mean the fabled maximalist “Single Tax,” which is a higher standard still—an annual collection of 100% of the rental value of unimproved land, combined with the absence of all other forms of taxation. Indeed, all we are talking about here is the much more modest and practical standard of a “pure” land value tax, that is, any property tax which collects a substantial amount of tax from land value, but which exempts all building value.

Watling briefly acknowledges several modern land value taxes, but immediately dismisses them all. Australia and New Zealand’s “have been repealed,” Denmark’s has too low a rate, and Taiwan’s LVT broadly exempts housing and agricultural land altogether. Watling gets at least one detail wrong here, because the Australian Capital Territory actually still has an LVT today, but perhaps he will find some reason to disqualify it.

Additionally, by making “pure” land value tax his target, Watling dismisses e.g. split-rate property taxes, which tax land at a higher rate than buildings, as well as policies which simply exempt a portion of building value from taxation. If he has a fundamental objection to those, it’s not in his article.

Nevertheless, just as with his prior four claims, even if we granted Watling his entire list of summary dismissals, this would still leave out the largest and most significant contrary examples, which Watling does not mention.

Historical LVT Examples

Watling rests his entire case on a 116-year old example, which opens the door to direct comparisons from the same era. There are no less than four notable Land Value Tax experiments which directly overlapped the time period Watling invokes, the 1900-1920’s. Watling does not mention them.

Kiautschou Bay Colony / Qingdao

This example has already been mentioned, which is sufficient by itself to refute Watling’s overly general claim.

Vancouver, British Columbia

In 1890 local Vancouver activists pushed to gradually lower taxes on buildings and raise them on land. By 1910 it already met Watling’s definition of a “pure” land value tax (no tax on buildings), and was even directly claimed by contemporaries as an example of a “Single Tax.” Contrary to Watling’s dire warnings about LVT immediately crashing homebuilding rates, this land value tax was credited even by its opponents as leading to an undeniable building boom (in fact, it was on those very grounds that they opposed it). The LVT did eventually come to an end, but it existed in various forms for over seventy years, finally being repealed in 1984.

This is a very different picture from the one painted by Watling, and one his theories do not account for. By contrast, Historian Christopher England offers a balanced and nuanced account of the policy’s rise and gradual fall from which many useful lessons can actually be drawn.

Houston, Texas

Houston had a split-rate LVT in 1912, the same exact time as the People’s Budget. Tax commissioner J. J. Pastoriza, who would go on to become Houston’s first (and last) Hispanic mayor, enacted a brief but successful Land Value Tax experiment in the Lone Star State; our three sources are Pastoriza’s testimony, Arthur Nichols Young’s book The Single Tax Movement in the United States, and the Illustrated Houston City Book of 1914. It wasn’t a “pure” land value tax, but it was close—buildings were taxed at 25% of their base value, and land was taxed at 75% of its base value.

Although Houston’s LVT experiment lasted about as long as the British LVT, it was ended not by its own failure to live up to expectations, but by the pen of a hostile Texas Supreme Court judge, backed by land speculators upset precisely because it did live up to expectations. While the LVT lasted it was demonstrably popular and had the exact opposite effects that Watling implies must always follow LVT: rents fell 20%, building rose 66% in the first 6 months and 51% in the first year, vacant lots filled in, mortgage interest rates stayed flat, and bank deposits surged. Pastoriza, in his capacity as tax commissioner, reported that his Somers system-based land valuations were a success; “out of 12,000 taxpayers only fifty refused to accept our prices as placed upon their real estate.”

Even if one doubts Pastoriza’s testimony, we have corroborating accounts from Arthur Nichols. We also have the undeniable fact of Pastoriza’s repeated electoral success, going on to win re-election as Tax commissioner on an LVT platform, and ultimately the mayor’s seat, even after the courts struck his program down. Houston accomplished in two short years, efficiently and effectively, what “the failure of the land value tax” asserts without evidence to be fundamentally impossible. Watling does not mention this.

Watling may fairly retort that we can learn nothing from a hundred-year old two-year example which abruptly ended, but in the meantime pulled in the direction LVT advocates happen to support. One could simply respond by asking why Watling then hangs his entire hat on his own hundred-year old two-year example which abruptly ended, but in the meantime pulled in the direction LVT opponents happen to support.

New York City

The Big Apple built more housing during the 1920’s than any time before or since, during a period in which new construction was exempted from property taxation. Watling does not mention this.

A retrospective report published in 1960 entitled “How Tax Exemption Broke the Housing Deadlock in New York City” provides some explanations as to why. It’s worth appreciating just how great the magnitude of housing produced in the 20’s was. The boom was so big that it amounts to a distinct archeological layer in the New York City timeline (source):

The state of the city at the start of the 1920’s was dire:

The chronology of the Twenties casts long shadows of the very plaints besetting New York today.

This was the picture four decades ago: A critical housing shortage. Rent-gouging landlords. Miserable slums dehumanizing the people in them. Inflated prices for land, labor, materials. Ineffectual controls. A welter of recommendations.

The solution?

The tax exemption law thawed the building freeze almost overnight. It attracted mortgage capital. It brought acres and acres of unused and underdeveloped land into use. It raised land values. It boosted municipal revenue. It paved the way for several pilot developments of low-rent housing units. It ended the acute shortage of dwellings in three years. It injected new vitality into the City.

No awesome powers, no vast public expenditures were involved in writing this chapter of New York City history, reconstructed in the following pages from accounts in The New York Times, and from official records. The formula excused property owners from real estate taxes on the value of new homes and apartments. This exemption specifically did not apply to sites, only to buildings on them. As the construction boom gained momentum, assessments on steadily increasing land values brought more tax money into the City’s treasury.

This reform, a time-limited “Universal Building Exemption” on new construction, had the same incentive effects as a targeted land value tax, and the empirical results speak for themselves. Even if one were to contest how much credit the building exemption incentive deserves, the one thing we certainly do not see any evidence for is the suppression of building that Watling confidently associates with the People’s Budget and generalizes to LVT itself by implication.

Lawson Purdy, president of the New York City Board of Taxes and Assessments from 1907 to 1918, was a key proponent of New York’s building exemption initiative. Purdy does not seem to have been an ardent Georgist, as he argued against extending the tenure of the building exemption once the initial period had passed, whereas a true believer would have insisted on leaving buildings untaxed perpetually. Nevertheless, it seems hard to deny that the building exemption boosted housing supply, with a clear and compelling causal mechanism: “tax buildings less, get more buildings.”

For more on this argument, see our recent article on the subject:

Property Taxes are Not Land Value Taxes

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Modern LVT Examples

There are also modern LVT examples that continue to this day and are being newly established. Watling does not mention them.

• Pennsylvania split-rate property taxes

• Baden-Württemberg, Germany (just implemented in January 2025)

• Estonia

• Australian Capital Territory (directly contradicting Watling’s claims that all of Australia’s LVT policies have “been repealed”)

LVT momentum is growing again

The real argument that Watling seems to be circling around is something like: “Sure, LVT sounds great, but it failed this one time, and also I haven’t heard of any times it succeeded, so it’s bad.”

Reasoning from your own perception is always fraught, because an individual human mind contains an incomplete accounting of all space and time. Aside from the historical examples we’ve already discussed, LVT is also experiencing a genuine revival. No less than ten state legislatures in the US have introduced active legislation, in red and blue states alike:

Even better, two states in particular—Virginia and Kentucky—didn’t just introduce bills, they passed them into law, both in the last month:

Two States Pass Land Value Tax Enabling Legislation -- Landscape 8

Additionally, there is rising interest in South Korea, a state which has all the necessary valuation tools to hit the ground running, unmatched socio-political urgency, and a sympathetic ruling party:

UBI advocates should watch South Korea

Please Make An Actual Argument

My fundamental complaint with Watling is that he draws his conclusions far too strongly from too little evidence, trains all his fire on one narrow, maximalist version of the policy, then uses this general vibe to widely dismiss all other incarnations of the policy without actually doing the necessary work to do so. In case this was in doubt from his article alone, he makes his attitude quite clear on social media. Here’s the banner he chose for his Twitter bio:

And here’s a representative post:

I am begging people to stop posting henry george. He was an economically illiterate crank who wanted to abolish cities and whose toxic ideology is now primarily used by NIMBYs to claim land "speculation" is the cause of the housing crisis.

These claims mystify me, because we’re all YIMBYs here (prominent members of organizations like YIMBY Action and others are on our board!), but it does clarify that Watling has some sort of personal animus towards Georgism specifically, and works backwards from this to dismiss not just maximalist historical Georgism, but all related policies.

The thing is, I don’t really care about defending the personal honor of either Henry George the man or the maximalist Single Tax. I’m just interested in good housing policies that work, and I’d much rather have that argument than whatever this is. What I’d actually like to see from Watling is a genuine first principles argument, in which he presents what he actually specifically objects to, why, what makes him so sure, and what evidence could possibly convince him otherwise.

Or as I like to say:
“please state the nature of your objection in the form of a falsifiable hypothesis.”

What do you actually object to, and why?

I make this plea not just to Sam, but to everyone opposed to LVT.

Let’s go down our policy stack from top to bottom; I invite you to select which specific points you disagree with, and why. Is it only the maximalist, “utopian” policies you find objectionable, or are the more moderate policies untenable too? If so, why?

My goal is not to engender some pointless online dunking war, but to discover the actual crux of our disagreement in good faith so that we can understand each other better and learn something from this exchange.

Single Tax?

Let’s start with the “Single Tax”—a policy in which a “pure” land value tax is the one and only form of taxation for an entire state. If you think this is out of reach in modern times, congratulations, you come to the same essential conclusion that I do in my original article series and book. I freely state that for the “Single Tax” to be achievable in countries like the USA in modern times, either spending must fall drastically (which seems unlikely), or else the strong interpretation of the ATCOR theory (“All Taxes Come Out of Rent”) must be true, a thesis on which I remain agnostic.

That still leaves all manner of pragmatic, common-sense reforms—the kind that folks like me actually advocate for—on the table, such as split-rate property taxes, building exemption, and even “pure” land value taxes.

“Pure” land value tax?

These are simply conventional property taxes in which all of the building value is exempt from taxation, and the tax falls fully on land. We have already cleanly refuted Watling’s confident claim that such a tax has “never” been successfully implemented “anywhere.” Given that “pure” land value taxes have been tried, I would like to know what makes them objectionable.

Split-rate property tax?

Watling, along with some LVT critics, seems to be a fan of conventional property tax, to the extent that he blames the British Liberals’ failed LVT for “dooming” the conventional property tax in Britain.² If you like conventional property tax, are you okay with levying a slightly lower rate on buildings and a higher rate on land? Say, a 4:1, 3:1, or 2:1 split? Why or why not?

Building exemption?

If you object to the split-rate property tax, are you okay with a simple building exemption, either for all buildings, or in a more limited way, such as only new construction, as was done in New York? Builders could provide the local taxation authorities with their building receipts and insurance policies, and have this amount deducted from their property’s taxable value. Do you object to this? Why or why not? Is it better, worse, or the same as existing property tax exemptions?

Any form of land valuation in general?

Do you simply reject all of our land valuation methods? Do you reject all the empirical evidence we have presented that the LVT regimes that depended on them were successful and achieved the predicted effects of the theory? Why or why not? Can you make a predictable hypothesis about what bad things will happen if we use them to support a Land Value Tax, split-rate property tax, or building exemption? Will you change your mind if we do that and the bad things you predicted don’t happen?

This chart?

Perhaps the argument is that taxing land and not buildings has some bad distortive effect, or cannot produce the beneficial effects it claims. Even should you dismiss all the evidence I have mustered thus far, I conclude by asking you to look at the following chart.

Here are two three-unit homes in Spokane, Washington. The sit across the street from a vacant lot. All three parcels are in the same location, in the same neighborhood, on the same street, with the same land use restrictions, and the same zoning code. The two houses are on much smaller lots, but because they have buildings on them, they pay a much higher property tax bill on a per square foot of land basis than the vacant lot does. Does this produce a tax incentive that punishes building and rewards holding land vacant on the margin? Why or why not?

I do not expect that I will be able to convince Mr. Watling and similar LVT critics today. However, I sincerely hope that I will come away from this exchange with a better understanding of their position, the foundational assumptions and testable claims upon which it rests, and I hope they come away with the same for me.

Genuinely and Sincerely,
Lars Doucet

1. The equivalent of what we could a “fee appraisal” here in the United States. See https://progressandpoverty.substack.com/i/158598256/what-is-mass-appraisal for the difference between “fee appraisal” and “mass appraisal.”

2. Seemingly in contradiction, Watling himself admits in his own article that a conventional British property tax lived on long after the People’s Budget in the form of Domestic Rates, until they were ultimately killed in 1990 by the Thatcher administration, not the Liberals, and replaced with Council Tax in 1993.