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Frank Stilwell and Kirrily Jordan: The Political Economy of Land: Putting Henry George in His Place

Concerns about urban policies also raise questions about the current relevance of Georgist ideas. For example, it is pertinent to ask whether a more uniform land tax would encourage the more efficient utilisation of urban space. George argued that, in order to cover the costs of a higher rate of land tax, landowners would be forced to put their land to its most productive use, and could not afford to hold it idle. Here is a clear link with the modern concerns to discourage ‘urban sprawl’ and to promote ‘urban consolidation.’ To the extent that a higher land tax would encourage the development of more housing in existing urban areas, the pressures for housing development in outlying areas would be significantly reduced. This, in turn, could reduce the burgeoning demand for transport that is currently characteristic of large cities.

Land tax also impacts on the politics of peripheral urban expansion. Currently, the prospect of huge capital gains resulting from decisions by local governments to rezone land from rural to urban acts as an incentive for landowners on the fringes of built-up areas to lobby for changes that will allow increased development. Hence, landowners push for rights to subdivision, irrespective of whether or not there is actual demand (Day, 1995: 3). By creaming off the gains from windfall increases in land values, land tax obviates this bias towards relentless urban expansion.

However, the question remains: would a uniform land tax be sufficient to produce more efficient patterns of urban development? Or would there still be a need for direct land use controls? Land tax can certainly be a tool for discouraging the wasteful use of land. It tends to discourage people from purchasing excessive amounts of land or leaving it idle. However, it may also encourage the overdevelopment of land in order to produce the income stream necessary to pay the higher rate of tax.

Critics of urban consolidation such as Patrick Troy (1996) have examined the potential problems of such overdevelopment, including a range of environmental impacts such as altered hydrological processes. It seems to be an overly bold claim that a Georgist land tax alone would be sufficient to achieve optimal urban development patterns. Land use controls a necessary adjunct to land tax - in setting minimum requirements for green space, for example.

Local government planning controls are also important to prevent incompatibility of land uses, such the development of hazardous or unhealthy industrial activities adjacent to residential areas. Targeted decentralisation policies are a means of encouraging the further development of regional centres. Such policies can work in conjunction with land taxes to ease growth pressures in the larger cities, while addressing long-standing spatial, social and economic inequalities (Stilwell, 2000: 254-260). The desirability of promoting more decentralised regional development is consistent with a Georgist perspective, but not altogether compatible with the claim that land tax would facilitate urban consolidation. It seems clear that it ‘overburdens’ land tax to expect it alone to produce the best spatial outcomes, taking account of all the economic, social and environmental issues involved in urban and regional policy. The various other policy instruments – including regulations relating to green space, zoning, and the provision of public infrastructure to pave the way for decentralisation – are important complements to land taxation. In other words, land tax is best regarded as a necessary but not sufficient condition for more effective spatial policy. ... read the whole article


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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper