Where my Georgists at?

Many libertarians accept that government, and therefore taxation, is necessary. If taxation is unavoidable, the economically literate libertarian should prefer a tax system with minimal distortionary effect and injustice. I think the Georgist idea of a single tax on the unimproved value of land is clearly the best tax on both counts, but is seldom discussed by economists or policy wonks.

Taxation distorts economic activity by discouraging the taxed activity. If we tax income, people will work less. That’s bad. Given that (almost) all the land there’s ever going to be is already in existence and can’t be destroyed, a tax on the unimproved value of land wouldn’t have these distortionary effects. Of course, there’s really no such thing as the unimproved value of land: the value of a particular piece of land depends on improvements made in neighbouring areas. Still, such a tax would surely be less distortionary than other forms of taxation.

Many libertarians will object that efficient theft is still theft, and therefore wrong. I’ve never completely bought in to the taxation is theft line, since I think property rights are themselves morally problematic. I really like property rights, and I think it’s pretty indisputable that we’d all be poor and miserable in a world without them.

I don’t like the quasi-mystical overtones of the “mixing one’s labour” metaphor, but I think some version of homesteading principle is the only way to think about just and reasonable acquisition. The Lockean proviso that we leave enough and as good for others, though, is never completely met in reality. Even if there’s an abundance of unclaimed land, location remains important. If I claim exclusive right to a piece of land, I am reducing the options available to everyone else.

I don’t like Nozick’s move of interpreting the Lockean proviso as being met if everybody is better off in a system of private property rights than the alternative. This neglects the intermediate possibility of attenuated property rights. It seems fairly plausible that everyone would prefer a system in which people could claim private ownership of land, but only on the condition that they compensate others – in Georgist terms, paying rent to the community. There are some problems in terms of justice, but, to me, there much less serious than the problems of current tax systems.

Milton Friedman once called it “the least-bad tax” (but to my knowledge never discussed the possibility in any depth). I’d go further and say it could be a positively good tax. If we could design a government and ensured it remained within predefined bounds, a nightwatchman state funded by a single land tax could be preferable (in expected value terms) to anarchism. (Constraining government in this way is impossible, though, which is why I’m an anarchist. Still, the “imagine a perfect government; wish really hard” approach is the dominant one in political discourse.)

Why, then, is the idea largely confined the certain portions of the left-libertarian fringe? With few exceptions, free market economists have neglected the possibility of replacing income or consumption taxes with land taxes. Fred Foldvary has done some great work, but that’s about it.

I don’t get it. Any ideas?

13 Responses

  1. You are missing a fundamental part of the argument.

    There is not a question of whether or not to have economic rent (unimproved land value) – as it is a naturally occurring economic phenomena under conditions of scarcity.

    The only question is – who shall pay it and who shall collect it.

    It is the location’s proximity to the labor, services, and infrastructure provided by the community, as well as, natural advantages that gives rise toit’s unimproved lan values.

  2. Odd that here it’s being advocated most strongly by Arthur Grimes. I tend to worry about implementing a land tax unless it’s a total replacement for income tax. Otherwise, we’re just giving them another margin on which to optimize.

  3. Since the Georgist argument is that the economic rent on unimproved land is the result of proximity to community services, it should be possible to enforce it as a social norm on the basis of ostracism and boycott by that same community without the need to engage in aggression against a non-payer. Once anarchism becomes a consensus philosophy, Georgism may well get a fair tryout and actually end up being used in some communities if its assumptions prove correct (I’ll admit that I don’t think they are, but I’ll respect whatever property systems arise in an environment of mutual respect).

  4. If you want to know why the idea is confined to the fringe left, you should read George’s book (Progress and Poverty) – he’s a fringy lefty. He believed he was creating a (socialist) utopia.

    That said, I think his idea has some merit for libertarians and conservatives. The whole idea just needs to be re-cast (at length) in a manner that won’t make libertarians and conservatives cringe.

  5. Done correctly, it’s possible to be a geoist without being a statist. As begreener pointed out, it’s a rent and not a tax, since it gets paid whether the state/community collects it or not: explicitly having the community collect it just changes to whom it’s paid.

    Suppose a certain area has land that can produce 10 bushels of crop and land that can produce 7 bushels. As long as the population is such that only 10 bushel land is needed, there’s no problem. When the 10 bushel land is gone, the Lockean proviso kicks in. Also, some of the “homesteaders” of the 10 bushel land suddenly realize that they can rent out their land to newcomers for a rent of 3 bushels (since the newcomers will get the same amount of profit from this as from homesteading 7 bushel land, they’ll be equally likely to choose either, assuming negligible transaction costs). But the newcomer can rightly ask, “If I’m doing all of the work, why should you get 3 bushels of my product,” to which the original “owner” can only reply “Let me direct that question to a group of men with guns,” whether that be the state apparatus or an anarcho-capitalist private protection agency, neither of which really meet the notion of nonaggression unless you use a tortured definition of title under which land ownership is based not on use but on the services of men with guns.

    The geoist, then, suggests that the community collect 3 bushels of rent from the original owner and distribute it evenly, so that both end up with 8.5 bushels (10-1.5 and 7+1.5). It’s not a new tax, it’s just changing who gets the rent that the original owner was already charging. Since it’s rent on unimproved land value only, it’s still a meritocratic system; it only serves to prevent the specific income inequality caused by one group claiming an eternal (and highly morally suspect) monopoly to the land and effectively turning everyone else into their serfs. So, profits come from merit and capital improvement, not from feudalism. Not a bad position for a libertarian to hold. And since ground-rent is easy to establish (in fact, if you have fire insurance, it’s already been established for your property) and the sole function of it can be redistribution to the community (really, back to the community since the claimed owner has already taken it from them in the form of his/her land rent, rather that redistribution in the traditional sense), it doesn’t require a government in the standard sense of the word: no arbitrary decisions need to be made on the value of the land (as we already have methods of impartial assessment), no decisions need to be made on how to spend the rent (it’s distributed back to the community), and no enforcement is necessary (as anyone is free to opt out of the system, so long as they understand that in that case the community won’t respect their claim of a positive right to hold the land under monopoly control).

  6. Hi Brad,

    We’ve been discussing this a little bit at the Freedom Democrats website. Some of us focused on why Georgism isn’t generally popular (it goes against the model of government as manager/looter), and another commenter focused on the role of capital in shaping libertarian awareness.

    Another possibility is that the single tax simply isn’t a big issue. I generally support it, but I don’t talk about it much anymore because other issues are more important — foreign adventurism, the drug war, the monetary system, subsidies, bailouts, trade wars, etc.

    Anyway, if you combine the LVT with a citizen’s dividend, then it is fundamentally a “leftist” policy in that it focuses on how poor people improve their lives and discounts the conservative impulse to make sure that people who have wealth are able to keep it.

  7. Re: Eric Crampton

    Most local governments already have the ability to tax real estate — so advocacy for the LVT doesn’t give government a new tool. In fact, the first step in implementing a LVT is to establish separate tax rates for land and improvements (i,e, buildings). If we remove improvements from the tax role, we’ve actually constrained most governments.

    After that, increases in LVT should be explicitly linked to the abolition of other taxes (sales taxes, income taxes, etc.)

  8. Typo notice:

    I wrote: “remove improvements from the tax role”

    I meant “the tax roll”

    Luckily, my first statement almost makes sense…if I had only written “their tax role”

  9. Sorry to keep posting, but I realized that I made an logical error in my first comment.

    You do not need a citizen’s dividend for LVT to be “leftist”. Land taxes (and property taxes in general) are less conservative than most other taxes, particularly income tax.

    One of the big arguments (from non-libertarians) in favor of income tax over land tax is that the income tax is based on “the ability to pay”. In other words, a progressive income tax will not cause anybody to lose whatever wealth they have (but it will prevent a person from increasing his wealth).

    In the end, the income tax creates a system where the rich stay rich and the poor stay poor, whereas property taxes create a system where everyone has to work for what they consume (treating rent as consumption).

  10. Georgists come from all over the spectrum. Some of us tend toward the left libertarian, but certainly not all.

    We simply prefer justice and efficiency, and a structure that discourages sprawl, raises wages, creates jobs, reduces wealth concentration.

    Henry George’s ideas provide the best solution to many of our supposedly intractable problems.

  11. […] Support for a Land Value Tax in New Zealand Posted on October 5, 2009 by Brad Taylor I suggested a few weeks ago that a land value tax would be preferable to any other tax system in terms of both economic […]

  12. Hey, I’m a right-libertarian and I’ve been leaning Georgist as soon as I read anything about it. The free market principles held by right-libertarianism are founded on the idea of individual property. Defining what individual property is, is then an important philosophical question to me.

    “First come, first own” just makes no sense as far as a basis for property rights in respect to land. Why should I be penalized for being born after the land is already owned? (and by what, 200 different owners [countries]? with 7 billion people on the planet?)

  13. […] I’ve said before, I would be very much in favour of replacing current taxes with land taxes, for both moral and […]

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