Link: Leona Helmsley’s Fortune May Go to Benefit Dogs

The living and the dead, the human and the canine.

Leona Helmsley and her husband Harry individually and together accumulated billions of dollars worth of New York City real estate. Who is entitled to that fortune?

Traditional knee-jerk property rights advocates would say that whomever Leona and/or Harry designated in their wills and trusts is the rightful recipient of all that value, once estate taxes have been paid.

That’s one point of view.

But another says that much of the wealth is not actually from buildings and other man-made amenities, or services offered by the owners of property, but from land value, and that land value is rightly our common treasure, our common property.

Brooke Astor also lived from the proceeds from the sale of appreciated real estate.

The reality is that buildings do not appreciate. They depreciate. A Federal Reserve Board study published in May, 2006, pegged annual depreciation on residential real estate at 1.5% per year

What appreciates is land, and none of the reasons why a piece of land appreciates have anything at all to do with the owners of the land. Landowners are inert.

And yet we treat – and even honor! – those whose fortunes are made on land appreciation as “self-made men” or women.

They aren’t breaking any laws. They are playing by the rules. And they’ve brilliantly noticed that our rules tilt the playing field in the direction of landholders.

I’m with Winston Churchill. I don’t seek to blame the landlord. I simply want to change the rules, to level the playing field.

I hope you will understand that when I speak of the land monopolist I am dealing more with the process than with the individual landowner. I have no wish to hold any class up to public disapprobation. I do not think that the man who makes money by unearned increment in land is morally a worse man than anyone else who gathers his profit where he finds it in this hard world under the law and according to common usage. It is not the individual I attack, it is the system. It is not the man who is bad, it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do; it is the State which would be blameworthy were it not to endeavour to reform the law and correct the practice. We do not want to punish the landlord. We want to alter the law.

That is his conclusion … Here’s where he starts:

We are often assured by sagacious persons that the civilization of modern States is largely based upon respect for the rights of private property. If that be true, it is also true to say that respect cannot be secured, and ought not, indeed, to be respected, unless property is associated in the minds of the great mass of the people with ideas of justice and of reason.

It is, therefore, of the first importance to the country – to any country – that there should be vigilant and persistent efforts to prevent abuses, to distribute the public burdens fairly among all classes, and to establish good laws governing the methods by which wealth may be acquired.

The best way to make private property secure and respected is to bring the processes by which it is gained into harmony with the general interests of the public. When and where Property is associated with the idea of reward for services rendered, with the idea of reward for high gifts and special aptitudes displayed or for faithful labor done, then property will be honored. When it is associated with processes which are beneficial, or which at the worst are not actually injurious to the commonwealth, then property will be unmolested; but when it is associated with ideas of wrong and of unfairness, with processes of restriction and monopoly, and other forms of injury to the community, then I think that you will find that property will be assailed and will be endangered.

It is quite true that the land monopoly is not the only monopoly which exists, but it is by far the greatest of monopolies – is a perpetual monopoly, and it is the mother of all other forms of monopoly. It is quite true that unearned increments in land are not the only form of unearned or undeserved profit which individuals are able to secure; but it is the principal form of unearned increment which is derived from processes which are not merely not beneficial, but which are positively detrimental to the general public. Land, which is a necessity of human existence, which is the original source of all wealth, which is strictly limited in extent, which is fixed in geographical position – land, I say, differs from all other forms of property in these primary and fundamental conditions. Nothing is more amusing than to watch the efforts of our monopolist opponents to prove that other forms of property and increment are exactly the same and are similar in all respects to the unearned increment in land. …

Did Leona “make” her money legally? I assume so. Did she play by the rules? Mostly, I suspect. Did she understand how the rules were stacked in favor of owners of choice bits of land? Yes. And one could logically interpret what is perhaps her most famous statement as being on precisely that:

“We don’t pay taxes, only the little people pay taxes.”

She wasn’t talking about illegal tax evasion. She was stating the reality of our tax system. The little people of New York pay taxes on their purchases. They pay taxes on their wages. They pay taxes on their payroll taxes!

But those who own New York City’s choicest sites don’t pay much on that land value.

Worse, it is the taxes of the little people which go to paying for the very services that make NYC a good place to live and allow landlords to charge tenants high rents this year and higher rents next year, and sellers to command high prices this year and higher prices next year for units that aren’t a great deal different from what one could rent or buy in other cities for a small fraction of the price.

Helmsley. Astor. Spitzer. Goldman. Just a few among the landlords of New York who collect – quite legally – value that all New Yorkers create together.

Change the law. Churchill had it right.

Life, liberty and the pursuit of happiness … for all of us, not just for a class of real estate operators. We shouldn’t have to fund their fortunes. That value rightly belongs to all of us.