The key to renewing cities is shifting from obstructive ways of
sharing rent, like rent control; and destructive ways, like looting
and subsidies; to constructive ways. Henry George showed us how
equity and efficiency go hand in hand, how the magic of justice
combines with the magic of incentive.
- First, by George, equity need not be in kind. The monetary
mechanism overcomes the clumsiness of in-kind equity. If four
families inherit a one-family house, all four don't crowd in;
they sell and divide the money, or one buys out the others. There is
equity in money as well as in real estate. Money is often better;
the reinvestment opportunity puts the house on a magic carpet to follow
you anywhere. Money is wonderful!
- Second, by George, use the tax mechanism. Do not divide land into
unusable morsels, or shackle the market with rent controls, or
dissipate rent in subsidies. Give land to the highest bidder,
and tax ground rents to support government.
Power to Destroy or
But we've always heard that tax destroys incentives. The news in
Henry George is that we can tax all the rent out of land, and not one
square foot will walk away, nor will God switch off the Creation. Man
creates capital by saving; some Other Force created land, and
sustains and serves it every day, undeterred by taxes.
Nor will Georgist taxes leave owners sulking on their land, but
the contrary. A 1983 Fortune magazine
article calls them "Higher
Taxes that Promote Development." The fixed tax is levied on land
value, based on opportunity cost. The owner uses land harder and
improves it more to meet a fixed tax; or sells, releasing surplus
land to those needing more space. Taxes stifle enterprise only if
they increase with enterprise. Land tax increases only with
opportunity cost, which is independent of the enterprise of the
owner. The only activity this tax impairs is withholding land from
use. ... read the whole article