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 uni 
formly 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,