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.).
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