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STANFORD UNIVERSITY MEDICAL CENTER
STANFORD, CALIFORNIA 94305 ¢ (415) 321-1200

STANFORD UNrversIty SCHOOL OF MEDICINE March 23, 1970
Department of Genetics

The Hon. Paul N. McCloskey, Jr.
House of Representatives

1719 Longworth House Office Building
Washington, D. C. 20515

Dear Pete:

Thank you for your letter of March 9 and for the copy of your address at
Yale on "Congress and Environmental Quality: Now or Never". I will comment
mainly on your proposals concerning land use, which probably have not been
discussed as widely as the ideas on economic control of pollution. I am
very much in agreement with these as an important element of an over-all
strategy of environmental conservation. I do have to caution about one
very small item - that there are still considerable gaps in our knowledge
about NTA that ought to be filled before we are sure that it is a panacea
in the detergent field (if I learn more about this I will surely let you
know).

Ka SOV) yh

Let me express my enthusiastic support for your proposal about land use
regulation, and for financing it out of the gain on appreciation subsidized
by public expenditures.

I wonder if it really would add very much to that idea to incorporate a
wrinkle that I may have briefly discussed with you some time ago, in effect
imposing a retroactive increment on assessments and property tax due when

a land use is changed. Lest this sound like confiscation, it could be
implemented by assessing all land at evaluation based on its maximum potential
development, but holding ## in abeyance and forgiving those taxes that have
accrued while land is maintained in an undeveloped state. The taxing authority
could then easily reach back for a period of ten or fifteen years to share in
the sudden appreciation of the value of land when its use has in fact been
improved. A possible virtue that this scheme might have as a supplement to
your proposals would be its self-enforcing character; your proposal would
require a rather elaborate system of allocation of benefits, some of which
might be regarded as’ quite dubious on the part of nearby landowners.

The kernel of your idea is, I believe, an important contribution and I hope
you will be pushing it.

LT, J. P. KENNEDY, JR. LABORATORIES FOR MOLECULAR MEDICINE, DEDICATED TO RESEARCH IN MENTAL RETARDATION

MOLECULAR BIOLOGY HEREDITY NEUROBIOLOGY DEVELOPMENTAL MEDICINE

 
 

Hon. Paul N. McCloskey March 23, 1970
Page 2

I would also view this proposal as part of larger actions that must be

taken against a rather vicious piece of economic pathology in this country,
rampant speculation in land values. I find it rather difficult to identify

a legitimate economic function for such speculation; and you have pointed

out all too clearly the distortions and pressures that result from it. The
inflation of paper values in land leads to a pyramid of credit that can only
encourage non-utilitarian developments, is accompanied by a siphoning of
gimmicky profits, and could lead to a rather serious collapse if ever punctured.
One of the very simple things that might, and probably ought to, be done is

the elimination of the preferential capital gains tax advantage on appreciation
of land values. You are very familiar with the innumerable schemes for tax
shelters that are encouraged by the present law and serve, as far as I can see,
no discernible social purpose.

However, these suggestions are just frills, and I want to reemphasize my
wholehearted support for your proposal in precisely the form that you have
presented it.

Sincerely yours,

Oy

; fart |
Jéshua Lederberg
Professor of Genetics

P.S. I would indeed like to write a column to discuss these ideas, and I
could peg it on your speech if ‘you just give me the date (which was not on the copy).
However, as an alternative, if you could give me a line when you intend to dis-
cuss this issue on the floor or introduce some legislation, it might be an even
more propitious time to bring it up.

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I realize that my self-enforcing scheme may founder because it deals with a
direct extension of taxes that are not now within the province of federal activity,
and it would take forever to get the requisite peripheral legislative action.
However, it should still be possible for the federal income and capital gains
taxes to accommodate the situation.

I would also suggest that you consider a similar approach to implementing your
own proposal as an alternative to establishing a new system of taxation within
the framework of the urban land bank. For example, a developer might be subject
to an “excess profits tax" at close to 100% of the appreciation on his land,
subject to remission on a scale dependent on a finding from the local urban land
bank authority that implicit subsidies - like that accelerator! - were not the
source of the gain. With such an approach one could also build in a floor to
eliminate a large volume of nuisance level applications. (For example, that
capital gains up to $1,000 per year could be treated as they are today.)

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