Wednesday, April 15, 2015

Land Value Tax Redux

It's tax day.  And when you think of land use and taxes, you have to think of Henry George. Interestingly, several weeks ago The Economist ran an article reevaluating the concept of George's land-value tax.  Here is the article, and here are the first few paragraphs:

LAND prices mainly reflect location: farmers may till the soil, or drain it, but most increases in land’s value comes from the activity of other people. Nobody builds skyscrapers or shopping malls in the wilderness. Landowners, in other words, enjoy unearned income from the benefits bestowed by good transport links, and proximity to customers, suppliers and other businesses. Once they have bought their land, they keep this money. 

But why not tax it? That simple but revolutionary idea has deep roots. David Ricardo termed unearned income from land as a pernicious anomaly: “that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil”.

His best-known follower was Henry George, perhaps the only tax theorist in history whose beliefs have become the object of almost cult-like devotion. One of his fans invented the game now known as Monopoly, to exemplify the evils of untaxed rent. In a book called “Progress and Poverty”, published in 1879, George argued that land-value levies should replace all other taxation, leaving labour and capital to flourish freely, and thus ending unemployment, poverty, inflation and inequality.

His modern adherents rarely go that far, but land-value taxation (they prefer to call it a location fee) does have many theoretical virtues. . . . 

Rest of the article here.

| Permalink