Even if Insufficient

Fred E. Foldvary — The Ultimate Tax Reform: Public Revenue from Land Rent

Tideman et al. (2002, 17) “estimate that the net gain (measured in real dollars of 2000), from shifting as much taxation to land as could be financed by collecting 90% of the land rent, would be $1308 billion or 14% of NDP in 2002 and $4,799 billion or 26.6% of NDP in 2042.” Even if only a fraction of government revenue shifted from the types of taxes we know today to a geo-rent tax, the efficiency gains could be substantial. Some critics simply do not believe these results, without bothering to read them. I have not seen a rebuttal of Tideman’s calculation.

Even if land value taxation does not yield the revenue that is desired, this is no argument against shifting as much public revenue as possible to rent-based sources. Public revenue from land values is the most complete application of “supply-side” economic policy. Supply-side policy attempts to increase production and the supply of goods by decreasing costs, such as by lowering taxes and eliminating excessive regulations and barriers to trade. A complete tax shift, away from taxing production to taxing land values, is the ultimate supply-side policy, since it removes the excess economic burden of taxation. The public collection of land rent is thus the ultimate in tax reform.

Land value taxation would also result in a substantial reduction in the cost of government. The administrative cost of land value taxes would be less than that of existing property taxes (which require a greater inspection of buildings and improvements), and the cost of enforcing income and sales taxes would be eliminated. By improving economic growth and allowing workers to keep all the money they earn, land value taxation would result in higher incomes, reducing the demand for government welfare programs. Decentralization, privatization, and the elimination of wasteful government programs would further reduce the amount needed to fund government. ... read the whole document