112

THE  A  B  C  OF  TAXATION

subject  to  charges  is  not,  scientifically  speaking,  the
same  as  a  thing  free  from  charges.  Title  to  a  tract  of
land  subject  to  taxation,  is  not  by  any  means  the
same  thing  as  title  to  the  same  land  free  of  taxation.
Therefore,  in  dealing  with  land,  we  speak  of  a  gross
value,  and  an  assessed  valuation.
Gross  value  is  the  capitalisation  of  the  gross  ground
rent.  If  the  current  rate  of  interest  is  5  per  cent,  the
capitalisation  is  said  to  be  “  at  twenty  years’  purchase,”
that  is,  twenty  times  the  amount  of  the  annual  income.
In  other  words,  it  is  an  amount  5  per  cent  of  which
would  be  equal  to  the  annual  rent  which  the  land
commands  for  use,  free  of  charges.  What  pays  $1,000
annual  net  income,  is  worth  $20,000  to  buy.  This  gross
capitalised  value  is  the  value,  which,  as  we  claim,
should  even  under  the  present  system  be  taxed  uniformly ­
  with  other  private  property.
If  the  gross  ground  rent  of  a  tract  of  land  is  f  1,000
a  year,  and  it  is  subject  to  no  taxes,  the  market  value,
assuming  the  usual  rate  of  interest  to  be  5  per  cent,  will
be  $20,000.  But  if  it  is  subject  to  an  annual  tax  of
$200,  the  tax  reduces  the  net  rent  by  20  per  cent  and
hence  reduces  the  price  of  the  land  correspondingly  to
116,000.
Net  value  is  the  capitalisation  of  the  net  rent  (the
income  less  the  tax)  at  the  current  rate  of  interest,  and
is  more  familiarly  known  as  the  selling  value.
The  assessed  valuation  is  the  valuation  placed  upon
land  by  assessors  for  purposes  of  taxation.  It  varies
in  different  localities,  being  in  Massachusetts  usually
from  13  to  100  per  cent  of  the  selling  value.
We  often  speak  of  this  tax  upon  land  value  as  a  tax
according  to  benefits  bestowed,  but,  strictly  speaking,