Prosperity

Why the Left and Right Can Agree on Taxing Unearned Income

It makes moral and economic sense to tax rent-seeking

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By Matt Zwolinski

Nobody likes taxes. But not all taxes are equally bad. From a moral perspective, some taxes are more unjust than others – imposing costs, for instance, on precisely those people who are least able to afford them. And from an economic perspective, some taxes are more inefficient than others, distorting economic activity by discouraging work and/or investment.

So, if we resign ourselves to the fact that some taxation is a necessary evil, it’s worth asking the question: what is the least evil way for governments to raise revenue?

In 1879, an American social theorist named Henry George wrote a book entitled Progress and Poverty in which he proposed an intriguing answer to this question: government financing should be derived from one “Single Tax.” And that tax should be not on income, or on consumption, but on land.

By “land,” George meant not just the ground beneath your feet but all natural resources. That includes the dirt on which you’re standing but also the minerals under the dirt and the airspace above it. Anything that exists independently of human activity but which can nevertheless be appropriated and used for human purposes is a natural resource, and the unimproved value of such resources is a legitimate object of George’s Single Tax.

Why is this tax better than any other? George had two arguments: one moral, and one economic.

The moral argument starts from the same place as John Locke’s famous discussion of property, with the claim that each individual is the sole rightful owner of his body and labor. Because George accepted Locke’s idea of self-ownership, he argued that most forms of taxation are unjust – essentially a form of theft. If you own your labor, and you choose to sell your labor to somebody else, no third party – including government – can legitimately demand that you give them a portion of the income you’ve received. To do so would be, in effect, to steal your labor.

But natural resources are not the product of anyone’s labor. They simply exist, on their own, as a free gift of nature. And because nobody created them, nobody has any better claim on the raw value of those resources than anybody else. Your ownership of your body and of your body’s labor does not give you the right to put a fence around a piece of land that your labor did not create, and to prevent everybody else from using it without your consent.

Natural resources, George thought, belong to humanity as a whole, and not to any particular person. A tax on the unimproved value of those resources is therefore one way in which humanity as a whole can reclaim what has been unjustly monopolized by a few, and do so moreover without violating individuals’ self-ownership. The Single Tax, on George’s view, is the only kind of taxation that does not amount to theft.

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But not only did George think the Single Tax was more just than other forms of tax; he also believed, like Adam Smith before him and economists from Milton Friedman and Joseph Stiglitz after, that it was more economically efficient. Most taxes have a distortive effect on economic activity. A tax on income causes people to work less than they would if they simply followed the normal market forces of supply and demand. A tax on capital gains causes them to invest less. In short, any time you tax something people do, or anything that is produced by things that people do, then people are going to do less of that thing and produce what economists call “deadweight losses.” But since natural resources are not the product of human activity, a tax on their value obviously doesn’t lead to people producing less of them. All it leads to is less “rent” winding up in the hands of the landlord, and therefore less of an incentive to become a landlord in the first place, at least if all you’re going to do with the land is hold it and charge other people for its use.

Of course, many landowners do more than this. Many landowners use their land productively. They build things on it; they plant trees on it; they fertilize the soil. Insofar as landowners improve the land – or “mix their labor” with it, in Locke’s terminology – they are entitled to something in return for their labor. But what they are entitled to, George insisted, was only the value of their improvement. If you make a $10,000 improvement to a $500,000 tract of land, your labor entitles you to the $10,000 you’ve produced. It does not entitle you to the $500,000 you simply took. By allowing people to keep what they’ve produced – but only what they’ve produced – we both respect their moral claim to the products of their labor, and we maintain a strong incentive for people to use their land productively.

Henry George was someone who understood the productive powers of capitalism and free trade. But he also was someone who believed that that there was important, though strictly limited, role for government to play in a free society, and who realized that some mechanism had to be found for financing the legitimate functions of that government. In the Single Tax, George believed he had found a way to do so that was both morally just and economically efficient. If the Single Tax really is compatible with both individual self-ownership and economic efficiency then, who knows? Perhaps it’s a tax that even libertarians could learn to love.

Originally published at Learn Liberty.

2016 March 8


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  • rorysutherland

    The interesting question for Evonomics readers to answer on Georgist taxes is similar to that on inheritance tax. Both such taxes make more sense in many ways than income tax, yet for interesting reasons they are peculiarly unpalatable to the public – ie the electorate. Why is this, and how could they be presented in such a way that they would gain wider acceptance or even support?

    • LeeHazelwood

      There is certainly some similarity between the two taxes morally imo, but an IHT is prone to many loopholes and avoidance methods which then requires a level of state intrusion onto peoples finances which LVT simply does not.
      LVT is in a way a voluntary tax, if you do not wish to pay you can move or sell/pass on the the title deeds to someone that does. You can then either buy land somewhere else or rent and not pay the tax at all. But then not owning land to gain access to land you must still pay rent which means you really still pay the tax by proxy anyway.
      As long as the tax is assessed correctly it will always be paid.

      As for public support, well George himself did greatly popularize it even if this has subsequently been sidelined and belittled his influence is clear. http://masongaffney.org/publications/K1Neo-classical_Stratagem.CV.pdf
      While there is no perfect example this is not an untested theory, ie Taiwan still bears the legacy of Sun Yat Sen’s expressly Georgist influence , in the UK Winston Churchill tried to enact a land value tax in 1909 only to see it overturned by the landowning House of Lords despite it’s popularity among the general populace at the time. But today the myth of the democratization of home ownership means people are naturally averse to taxes upon what they perceive as their natural property rights. In truth as Michael Hudson has emphasized all that has really happened is the banks/financial sectors have to a great degree taken on the role of the feudal class today, charging rent as interest on mortgages.
      Those who are simultaneously glad of their house price rises but worry their grandchildren cannot get on the property ladder need to see the two phenomena are one and the same.
      The basic logic is not that complex but few consider the full implications, it is undeniable that ‘house prices’ increasing year on year above rental yields will have to create huge corrections. As banks create credit they create more more to bid up land/house prices. In turn that increasing land value as the banks ‘asset’ is then used as collateral for more lending, a positive feedback loop. This goes on until land prices are so high that the interest on mortgages is not matched by rents and the price begins to correct with devastating results for the whole economy. Indeed a Georgist predicted the last crash some 11 years before the event, because they are the only ones who see the land price as a key metric to understanding the chief driver of the economy. http://www.businesscycles.biz/chartsbusiness/chaos1997.htm

    • The Inheritance Tax hurts Small Business which always represent the future. IBM, Apple, are two we’ll know companies that started out as small business, almost all major industries today started out as small businesses. Hense we should keep the system open, and it often takes more than one generation to establish a business. My family business lowered the cost of fireproofing for all Americans. It took us two generations before we could complete with WR Grace, when we did they lowered the selling price of their Fire Proofing from $23 a bag to $12 a bag. Inheritance taxes hurt the free market. One is better off with resources taxes and the FAIR TAX on GOODs.

    • Treblig3

      Most upscale people have a lot of unearned ‘land’ income. That indeed is a large part of their wealth. They would be against such a plan; they want to retire and leave land for their children.

  • “what is the least evil way for governments to raise revenue?”
    This is where most of us fail to understand government finances.
    The necessity for a government to tax in order to maintain both its independence and its solvency is true for state and local governments, but it is not true for a national government.

    http://hir.harvard.edu/debt-deficits-and-modern-monetary-theory/
    you might ask, “Well, don’t we pay taxes and buy bonds so that the government can spend?” Well, you first have to ask yourself the question, “Where do you get the money to pay taxes and buy bonds?” And the answer is that we can’t get our hands on the currency until the national government spends it. Spending is the prior act in a fiat monetary system; taxing and borrowing are following acts. In effect, the government is only taxing what it has already spent, and it’s only borrowing back money that it has already spent. Once you start pursuing this logic, you realize that most of the propositions that are occupying the current debate around the world are based upon false premises.

    • LeeHazelwood

      Note the MMT argument and the LVT argument are not competing theories, indeed imo they complement eachother well, and several prominent MMT supporters are in favour of LVT. Govts can create money via welfare payments or destroy it via taxes.
      Economic rent by definition serves no useful purpose so by destroying it via this ‘tax’ the state is aligning incentives in the market regardless of whether it then chooses to run a deficit or match welfare payments 1:1 with tax receipts.

      • “Govts can create money via welfare payments” So what about when Govt gives Billion Dollars contacts to defense contractors to build those war machines? Don’t they create money then? Why just call out welfare payments? Sounds like you are taking a cheap shot at those recipients, as if the dollars they receive is of a lessor value than any other dollar circulating in the economy.

        • LeeHazelwood

          I’m happy to extend it to any Govt spending, and yes some spending is clearly more justifiable than others. But even so how you interpreted my comment as an attack on welfare recipients is still rather perplexing.
          In fact imo every citizen should receive an unconditional equal share of the collected land rents, with a further safety net for the most vulnerable.

  • Merlijn Kamps

    Interesting idea. It seems it can very easily end up highly unfavourable for indigenous and tribal societies. Their lifestyle requires much more land to sustain less wealth. Maybe if the taxes concentrated on mineral extraction and pollution much more than acreage it could work but to tweak all the factors just right seems difficult. Maybe it can only work for a more or less homogeneous society of people. Has anyone written about these questions yet to your knowledge?

    • LeeHazelwood

      ‘It seems it can very easily end up highly unfavourable for indigenous and tribal societies. Their lifestyle requires much more land to sustain less wealth.’

      If a society has access to free unknowned fertile land as ‘the commons’, they would have little need of LVT as lands value is not distorted here by either natural finite scarcity nor artificial scarcity created by the monopolization of land.
      But remember LVT is only levied on land ‘value’ not size, residential land in the UK for example is worth around 200 times more per acre than land designated as farmland.
      If taking a hypothetical remote tribe had some form of LVT it would only charge those who wished to be nearest to a certain scarce resource or live nearest the Holy temple, the rents and therefor tax would always be kept low as long as the abundance of free land existed at the margins.

  • I would be interested to read more about some practicalities: What to use as value to base a tax percentage on? How to prevent that that value becomes zero (i.e. no one takes responsibility for responsible ownership of natural resouces any more) by the very act of taxing it?

    I thought the article would also cover ‘rent-seeking’ in a broader sense, that of taking a larger slice from the pie than you have contributed to it. (see https://en.wikipedia.org/wiki/Rent-seeking)
    Why limit it to natural resources and not include social resources created by our ancestors, that which has not been created by OUR activity?

    • LeeHazelwood

      ‘What to use as value to base a tax percentage on?’

      Ideally rental data is collected. Now of course rental data typically includes the return to capital ie buildings as people do not often rent our empty plots of land, but this can and is deducted by valuers.
      It is already routinely done with buildings insurance too, or go to any property website and they can value the average rental based on algorithms for your type of location and planning limits.
      Take the most marginal land used for the same purpose ie with same planning limits as your lowest base and calculate the rest based on the difference which can then only be a difference in land values. The more collated data the better.

      There are various valuation methods used throughout the world, taxes upon land are certainly nothing new. LVT just tracks the market data. Will it ever be perfect?. Most taxes levied upon wages or capital are set by government at an arbitrary level based on ideological assumptions like laffer curves, fear of capital flight or excess dead weight losses. None of these apply to LVT, it is as good as the data the market provides and the assessment process.

      How to prevent that that value becomes zero (i.e. no one takes responsibility for responsible ownership of natural resouces any more) by the very act of taxing it?

      The value of land is not destroyed by the tax, only the market price of land – a very important distinction. No useful information is lost, something Murray Rothbard completely misunderstood.
      And that loss of market price of bare land is very good thing, because it prevents the price and rents diverging aka a ‘housing bubbles’, because currently buying a freehold land title gives you the right to ALL future rents until you sell the title, so it is a speculation upon them. With LVT tracking the rises (and falls) in rents, any increased value of land is absorbed by the higher tax, so the speculative distortion is removed.
      . In theory a perfect 100% LVT would logically reduce the market price of land to zero. But this does not mean lands value has been reduced, only that the ‘excess’ site value which is currently left in the hands of the title holder is now taken back by the state/community via the tax which created and protects the monopoly title in the first place.
      If a landowner can only get the rent to pay to maintain the capital and no longer wishes to ‘take responsibility’, if someone is still willing to buy/accept the title deeds and the tax burden, then that means the parcel is now occupied and ‘owned’ by the user who thinks they can use it most productively to earn a return above the liability of the tax.

      Why limit it to natural resources and not include social resources created by our ancestors, that which has not been created by OUR activity?

      Land value includes location value. ie Think of what you buy when you purchase a London property, the buildings value may only account for 20% of the market price, the land value comes from the access to the deep cultural history, legal system, roads, transport, millions of people etc.
      Were it all flattened tomorrow by a comet, even assuming the physical land itself were not damaged it would be worth little. So it really does include everything our ancestors created, and any positive effect of what we currently do today which is passed onto others land value as an externality.
      However it is true land even when understood in this broad sense is not the only monopoly that allows potential ‘rent seeking’, an obvious example are copyrights and patents. But land in it’s economic terms dwarfs that in it’s significance, maybe as much as 1/3 of GDP whereas intellectual property may be only 1 or 2%.

    • Duncan Cairncross

      “not include social resources created by our ancestors, that which has not been created by OUR activity?”

      That is a mouthful! – and incredibly important
      Let’s look at invention
      Newton said that – he could only see so far because he stood on the shoulders of giants
      I’m an engineer – every time I do something I use knowledge that has been developed by millions of people over thousands of years,
      Back in my University days it amazed me that some doubledome in the past had devoted decades of work to create a piece of knowledge that unwashed students would absorb and be able to use in a couple of hours,
      If we could not build on the past we would still be wondering what type of stone to make a hand axe

      So somebody invents something – barbed wire for instance – the actual invention of the barbed wire is a tiny layer of icing on the cake of all of the previous inventions/developments that made barbed wire possible

      So the inventor can only “own” a minute percentage of the invention,

      That is not to say that society cannot award him a much higher percentage in order to encourage his efforts, but that is a decision of the society and has nothing to do with any rights or principles

  • kouroi

    Michael Hudson is arguing for this type of tax for decades…

  • Tom Lowe

    It’s a good idea to read *Progress and Poverty* by HG and a book on Modern Monetary Theory before taking on the subject of an LTV. Several observations:

    * For urban and suburban homeowners, a change to LTV would reduce taxes on large houses sitting on small parcels of land and raise it on small houses located on large plots. This would encourage higher density housing with the savings to municipal governments like water lines, street construction and maintenance, and police protection.

    * Farmland would be valued as a multiple of the net income produced by its best use. Alternatively, it could be the prevailing rent in the area for land of the same yield. Some land is so unsuitable for farming that the net income from its best use is zero, and thus the taxes would be zero (or some nominal amount). That is similar to what HG meant by marginal land, which was land the yield from which was sufficient to support only its inhabitants.

    * Because of the difficulties of determining the value of minerals under the ground, many Georgists recommend severance taxes levied when the minerals are actually extracted.

    * Owners of vacant land in an urban environment would see a large rise in their taxes. Since this land is almost invariably held for speculation, an LVT would force the owner to improve the land or sell it. For the same reason, the LVT would function as a tax on urban sprawl.

    * To avoid hardship and economic distortion, an LVT could be phased in over, say, 10 years.

    * Raising the LVT and eliminating the sales tax would significantly aid people closer to the bottom of the income ladder at the expense of the landholding class. Such measures are politically impossible, of course, but would be far less regressive than our current system.

    * An LVT would discourage land bubbles, since increases in land values would lead to proportional increases in taxes, thus making the purchase of land for speculation less profitable.

    * Wetlands could be made exempt from the tax so long as they remain undisturbed.

    Progress and Poverty is well-worth reading as long as you keep in mind the time in which it was written (the gold standard, for instance). HG’s prose is powerful and his arguments in many cases compelling.

  • Macrocompassion

    There are at least 16 effects on the macro-economy that come from Land Value Tax or LVT.

    16 Aspects of LVT Affecting Government, Land Owners, Community and Ethics

    Three Aspects for Government:

    1. LVT, adds to the national income just as do other taxation systems.

    2. The cost of collecting the LVT is much smaller than for income tax and other
    production-related taxes.

    3. With LVT, the national economy stabilizes and no longer experiences the 18
    year business boom and bust cycle, because speculation and over-pricing of land
    ceases.

    Six Aspects Affecting Land Owners:

    4. LVT is progressive, the owners of the most potentially productive sites
    pay the most tax.

    5. The land owner pays his LVT regardless of how the land is used. When the
    land is leased to tenants most or all of the resulting ground-rent is the tax.

    6. LVT stops the speculation in land prices, because any withholding of land
    from proper use is no longer worthwhile.

    7. The introduction of LVT initially reduces the sales price of sites, even
    though their value (or potential usefulness) may continue to grow. This is because more sites become
    available and competition for them is less fierce.

    8. With LVT, land owners are unable to pass the tax on to their tenant renters,
    due to the reduced competition for access to the land that will be in use.

    9. With the introduction of LVT, land prices will initially drop. Speculators
    in land values will tend to foreclose on their mortgages and to withdraw their
    money for reinvestment. Therefore LVT should be introduced gradually so that it
    allows investors sufficient time for the speculators to transfer their money to
    company-shares, where their greater use will meet the increased demand for
    produce (see below).

    Three Aspects Regarding Our Community:

    10. With LVT, there is an incentive to use land for production or residence,
    rather than it laying idle or being partly used.

    11. With LVT, greater working opportunities exist due to cheaper land and a
    greater number of available sites. Consumer goods become cheaper because
    entrepreneurs have less difficulty in starting-up and running their businesses.
    Demand grows, unemployment decreases.

    12. As LVT is introduced, investment money is withdrawn from land and placed in
    durable capital goods. This means more advances in technology and cheaper goods
    too.

    Four Aspects About Ethics:

    13. The collection of taxes directly from productive effort and commerce is
    socially unjust. LVT replaces this form of extortion by gathering the surplus
    rental income, which comes without exertion on the part of the land owner.
    Consequently LVT is a natural system of money-gathering.

    14. Bribery and corruption cease with LVT. Before, this was due to the leaking
    of news of municipal plans for housing and industrial development.

    15. The improved use of the land will reduce the damage being done to the
    environment due to the sites being held unused being dumping grounds as well as
    the greater distances needing to be traveled between home and workplace
    requiring more transportation services and the associated emissions due to
    unnecessarily fossil fuel use.

    16. Because the LVT takes away the advantage that landlords
    hold over other members of our society, it provides us all with a much greater
    equality of opportunity to earn a living. Entrepreneurs can operate in a
    natural way to help provide full employment and this means that earnings will
    correspond to the rise in the value that the labor or effort has put into the product
    or service. Consequently, after LVT has been properly introduced it will eliminate
    poverty.

  • I do not like the starting point of this article that tax is essentially unjust and evil and that land value tax (or rather natural resources value tax) is the lesser evil.
    Taxes (paying for public goods) is no more evil than paying for what buy in a shop (private goods) or paying your contribution for a good cause for people get paid to work for it on your behalf.
    I like the idea of discouraging rent-seeking, but only if rent-seeking is understood in its general meaning of seeking to get a larger share from the pie than you have contributed to (baking) it by exploiting something (property, access, power).
    Whether a resource is ‘natural’ or man-made (by our ancestors rather than ourselves) doesn’t matter for (the negative effects of) its exploitability from my perspective.
    A problem with raising taxes only in ways that discourage rent-seeking is, that that source dries up when rent-seeking is effectively discouraged.
    Governments need complementary sources of revenue to provide for the public goods that we need.

    • Jason

      LVT does not discriminate between speculators/absentee landowners and your average homeowner. Every person who owns a piece of real estate pays the tax. A geoist society will have its revenue so long as people desire land for private use.

  • All Labor base taxes (FICA/FUI/ Fed. Inc. Tax) are foolish, unless there is full employment everywhere and one want to reduce the demand for Labor. Taxes on Non-renewable resources have a good tax base in that it promotes the conservation of resources, and those resources that are not used this year, can be used next year. However, since we live in the world, where there are various tax systems, we should try to insure that foreign goods share the same tax burden as domestic goods, so we should have a tax like the FAIR TAX on goods (not Labor or Services). The Fair Tax would promote domestic employment which is required if we want to improve the lives of all in this nation, and have FAIR TRADE as well as FREE TRADE.

  • Adrian S

    How does this stand up to critical analysis and field-testing? I’m curious if these assumptions were put to the test seriously until now.

    To me (but then again, this would also be an assumption) it seems like they were wrong about the motivation of people to work and invest. It’s just not supported by the data. Sure, taxing income has an impact on behaviour, but to say that it discourages the want for more capital is obviously contradicted by reality, 100 years later, countries that do tax income are the most prosperous ones.

    It seems like the only conditions needed for economical prosperity is the ability to enjoy the fruits of your labour. People have good work ethics in those countries that are safe to live in, where they have better health, better education, better quality of life and they tend to want to acquire more (not just gdp per capita, but other indicators as well, like social mobility) in countries that are fair, where the justice system is equitable and efficient, where bureaucracy is reduced, where corruption is actively tackled, where trade is free and where fewer people receive unfair advantages.

    I don’t confuse this with actual causality, so this is why I ask the question: how do we test his ideas and are they actual studies that try to prove this or not? Otherwise, it just seems like old-school conformism to ideas that don’t really stand up to scrutiny.

  • Why tax just real property and not tangible personal property?
    Tangible personal property was once part of real property.

  • Rick

    The assertion that people work fewer hours when taxes are high and more hours when taxes are low is obviously disingenuous. The reality is that when taxed, people have to work more hours to generate the income they need or expect. Labor is not like a physical product that can maintain value over time. Any time not spent on labor cannot be saved for a later date when the labor can fetch a higher price, unlike a commodity such as oil, which can be held on to until a later date.

    A human being only has so many hours of labor to sell. This number decreases hourly. Any labor not sold now is pure dead-weight loss. Observation of unemployment rates compared with changes in taxation also gives lie to this assumption. When taxes go up, we do not see a rise in unemployment or more people working part time. Instead, we see more people working full time, lower unemployment, and wages rising with productivity. When taxes go down, people can cut back on hours worked and still receive the same pay, more people work part time jobs (sometimes several at a time), and wages stagnate and do not follow productivity, as business owners are incentivized to pull cash out of the business’ equity rather than using the capital to grow the company.

    It is also important to note that with progressive income taxes, it is impossible to be taxed into poverty, as no taxes are due on the poverty level marginal tax rate. Any taxes paid are paid on post-poverty level income. Regressive taxes like sales taxes, however, can tax people into poverty, because they are not affected by income and are a greater burden on the poor than on the rich.

    A land tax is interesting, but would impact low-income people more than higher income people, reduces opportunity for home ownership, and is unlikely to raise anywhere near enough revenue to fund a complex society like ours.

    • Kapricorn4

      Any sovereign nation can create its own digital currency debt free, instead of borrowing it from private banks. The only function of progressive taxation would then be to delete money back out of existence as necessary to control the rate of inflation of the currency.
      (This is exactly what the banks do now as the principal of a loan is repaid, but they get to keep the interest.

      This would also render all sales, and state taxes obsolete, since the Treasury could fund each US state on a per capita basis.

      “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)

      “I believe that banking institutions are more dangerous to our liberties than standing armies.” –Thomas Jefferson

      “… The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating.” -Thomas Jefferson

  • Jorge Icabalceta

    I have been reading several articles and the comments in this page and
    find many of the articles interesting, eye-opening, but, on the other hand,
    I find many unfounded statements and straight attacks against the economic theory
    I know and most, if not all, of you with graduate studies in economics know.

    It bothers me when I read strong attacks against the theory proposed by
    any science. It seems to me that when people do that, it means that they got
    lost between theory and practice. Take this article about land value tax for
    example. I expected a more in detail writing but I found that this article
    merely reminds us that somebody sometime ago proposed this kind of tax. But no
    evidence against or in favor is shown. So, the article is very superficial in
    my opinion.

    Secondly, I find that many of the commenters say that taxes are evil. In
    my opinion, that is pure stupidity and lack of understanding of economic theory
    and how the real world works. One needs to take microeconomics 101 to learn
    about market failure and why the government has to provide some goods and
    services. In my opinion, taxes are not evil, they are good and they are needed.
    The bad part about taxes comes with the abuse of power by the government. And this
    brings me to my third point.

    I read so many posting about the “giant size” of the government and that
    we need little if no government at all. I watched in youtube the lecture of
    Milton Friedman recently; the title is “What is America.” I find his talk
    elegant, brilliant, and he was very eloquent. He makes his case about how
    America had a “golden age” from the second half of the 1800’s to 1914. He
    speaks about open immigration then and how that kind of immigration is not
    feasible today. Although I agree with his view on how open immigration is not
    feasible today (he gives a powerful and brilliant explanation), I was surprised
    on how he omits the fact that behind open immigration there was a government
    working for the country and its citizen. I said that because it was the U.S. government
    the one that made the Louisiana Purchase and the takeover of the west. I was no
    private party doing that, it was the government, and then the government
    allowed people to settle of those new acquired lands. Also, the mentioned “golden
    age” depends on what of the story you were on. For starters, blacks were coming
    out of slavery and were for a long time savagely persecuted and Native Americans
    were annihilated. So, it was a “golden age” for the white settlers but not for
    the rest of ethnicity.

    The bottom line is that I feel ashamed. I feel ashamed that a Nobel Prize
    winner can be so biased in his statements. I find the same here. Many
    commenters say things that would have to be tested via studies and research to
    check whether they can be accepted as truth. I feel ashamed that we call
    ourselves professionals and yet we attack pointless targets such a theory as being
    the guilty party for something that is happening in the real world.

    I think that the fact that I hold a Ph.D. in economics does not make
    economic theory necessarily responsible for my actions as a human being. It can
    be expected that my professional knowledge should be useful in shaping my
    behavior and vision about the world. But a person is also a moral individual. A
    person has also to have ethics and other values. So, would you blame the field
    of medicine for the work, for example, of Dr. Kevorkian? Or for those German
    doctors who conducted inhumane experiments on prisoners? I wouldn’t. I can
    easily separate your professional knowledge from who you are as human being.

    Every time I read anybody blaming a theory for the present state of
    affairs in the world I just think: bingo! I just found another lost person in
    this world.

    • Thanks, Jorge.

    • Jorge, some good thoughts. But just a note…in many countries an investor can only secure a 100 year land lease. A developer can put up a condo resort and sell units. But the land is owned by the country (typically a designated “district”) and it is the master owner. The lessee (the development qua HOA) pays a Land Value Tax (rent) to the master. The U.S., under the allodial system, doesn’t do this. When huge companies such as Amazon, Google, etc. become large land owners, all the appreciation inures to private capital wealth, not to the socius.

  • carlmilsted

    I used to be very enthusiastic about this idea but have backed off a few notches. “Unproductive” land ownership is the reason why the civilized parts of the world still have some left over nature. Recall the story of Robin Hood and the Sheriff of Nottingham. Hood was robbing the King’s recreational deer. If the peasants had been given full access to the forest’s deer, there wouldn’t be any left.

    Applying the idea inside urban centers might encourage infilling. But it won’t work for towns and cities which have negative ground value. I see potential for accelerating urban declines.

    The idea works better these days for taxing resource extraction. A carbon tax is a clear win. And if we use it to replace FICA, we follow Thomas Paine’s idea of applying ground rents towards universal retirement. Ran some numbers here: http://www.holisticpolitics.org/GlobalWarming/VsPayroll.php