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Land Value Taxation as Primary Revenue Source

There are people who suggest that since a tax on land value today might not be sufficient to meet all the revenue needs of government at all levels, we shouldn't even be seriously considering land value taxation. This strikes those who think seriously about the matter as very shallow reasoning.

If there is a form of taxation which is clearly superior to the alternatives, why would we not make it our primary revenue source, even if it alone is not sufficient to meet all our revenue needs? (And there are many who will make the argument — a fair one, I think — that the implementation of this reform would have many effects which would reduce the need for many of the social services we currently provide to those who are victims of our current structure. Many costs of government would go away.)

If land value taxation is insufficient to completely meet our revenue needs, well, let's use it anyway. If it supplies 30% and we must find other sources for the other 70%, fine. If it supplies 50% and we must find other sources for the other 50%, fine. If it supplies 70% and we must find other sources for the other 30%, fine. We should rely first on non-distorting taxes before we supplement with distorting ones. We should rely first on just taxes before we turn to unjust ones. We should rely first on taxes that align our incentives in directions we need to go (e.g., slowing, even reversing urban sprawl; increasing urban density to facilitate more and better public transportation; lower housing costs, etc.).

Louis Post: Outlines of Louis F. Post's Lectures, with Illustrative Notes and Charts (1894) — Appendix: FAQ

Q2. Would the single tax yield revenue sufficient for all kinds of government?
A. Thomas G. Shearman, Esq., of New York, estimates that sixty-five per cent of the rent that the land in the United States now yields actually and potentially to its owners, would be sufficient. But whether it would or not is as yet an unimportant question. If all revenues ought to be raised from land values, then no revenues should be drawn from other sources while any land value remains in private possession. Until land values are exhausted the taxation of labor cannot be excused. ... read the book

Charles B. Fillebrown: A Catechism of Natural Taxation, from Principles of Natural Taxation (1917)

Q48. But would it not be an injustice to the landowner?
A. If it be an injustice to tax hard-earned incomes (wages) to maintain an unearned income (net economic rent) that bears no tax burden, how can it be an injustice to stop doing so? There can be no injustice in taking for the benefit of the community the value that is created by the community.

Q49. What is the lesson of the inevitable "capitalization" of the land tax?
A. It is that an unfair discrimination in favor of the landowner can never be overcome until all taxes are paid out of ground rent; then all men will enjoy total exemption equally with the landowner.

Q60. Do you believe that economic rent ought to furnish a larger proportion of public revenue than it does now?
A. One hundred nineteen professors of political economy have answered "Yes." Eight have answered "No." ... read the whole article

Joseph Stiglitz: October, 2002, interview

Q: I want to follow-up on what you had said some months ago about land reform:

JES: "The main, underlying idea of Henry George is the taxation of land and other natural resources. At the time, people thought, "not really that too," but what was underlying his ideas is rent associated with things that are inelastically supplied, which are land and natural resources. And using natural resource extraction and using land rents as the basis of taxation is an argument that I think makes an awful lot of sense because it is a non-distortionary source of income and wealth.

Q: In Globalization and its Discontents, you write (p. 81): "But land reform represents a fundamental change in the structure of society, one that those in the elite that populates the finance ministries, those with whom the international financial institutions interact, do not necessarily like."

JES: Yes. Let me try to approach the question a little more systematically. Once you take the perspective I just gave, that means the management should be done in such a way that it maximizes the amount of money available to the US government from natural resources because they are within its domain and control. So, looking at the United States, one of the implications of this is that a foundation such as yours [the Robert Schalkenbach Foundation, created to promote the ideas of Henry George, as expressed in Progress & Poverty] ought to be very much against the policies of the US government of giving away our natural resources. Here is a case where we not only are not taxing it much, we're actually giving it away.

Q: I assume you're speaking in particular of oil and mineral rights, but would not Broadband Spectrum rights also be included in that category?

JES: Yes, Broadband Spectrum rights as well. Now, giving away rights such as those would be anathema to the spirit of Henry George. And the second part is that when you sell them, you want to do so in such a way as to maximize the revenues. And whether you decide to sell it or whether you decide to rent it, would be the question of what is the way that maximizes the extraction of public revenues.

Q: And those revenues go to the people. Not to private concerns.

JES: Exactly. So you're trying to say, from the perspective of public management, how can we take this inelastic supply of public resources and maximize the rents that we can extract from it, consistent with other public objectives? That is a very deep philosophical approach, and requires a re-thinking of how we manage all aspects of those public resources. However, much of what we do is inconsistent with that. Now, the issue of land reform is a little bit different. There, it's a two-step analysis. My concern that I expressed about land is that in many developing countries, you have most land owned by a few rich people, and the land is relatively little taxed. But the land is worked in a system of sharecropping in which workers have to pay the landlord 50% of their output. In a way, you can look at that 50% as a tax. The sharecroppers are paying a 50% tax to the landlord. But it's worse than a tax. Because it's not a land tax, it's a tax on their labor. And it's a tax that goes to the landlord rather than to society. So the notion is that land reform could take a variety of different forms. For instance, the government could take over the land and rent it to the people. Or give it to the people and have a land tax that would not have the distortionary effect of land reform. So, in a way, these systems of share-cropping are worse even than anything that Henry George was worried about in terms of misuse of land. ...

Q: I wanted to ask your view on the adequacy of land as a tax base. At one time, as you know, there was a "Single Tax" movement, for the purpose of deriving revenues sufficient to run the government solely from land value taxation. In your view, how feasible is that today?

JES: Most economists would say that you cannot run the US economy on the "Single Tax." In my mind, the "Single Tax" is the wrong way to think about it. The question is: "Would it be better if we had more taxation of land and natural resource, and more revenue from natural resource management, and I would include atmosphere and spectrum." And less tax on income and savings. And I would say, "Yeah." And I think many economists would agree with that. So, if you want to sell it as a "Single Tax," then, no, you won't get anyone to agree that there's enough revenue there. If you look at is a more "central" tax, then, yes, you will get most economists to agree with you.

... read the entire interview

 

 

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