Georgist land taxes balance community benefit & the efficiency of markets
July 13th, 2024
One thing I like about Georgist land taxes is they reflect a deep-seated intuition many people have that land should be owned by the community, while still employing markets to ensure efficient use of this limited resource.
People feel that land is special and should serve the collective good and reflect community interests. This intuition manifests in behaviors like NIMBYism, where residents oppose changes to their neighborhood and try to stop people from doing what they want to their own property. These behaviors essentially reflect a belief that they as a community have rights over the property in question, even if they don't own it.
One reaction is to scoff at this behavior, because it violates a basic interpretation property rights. But another reaction is to ask ourselves, why do people have such strong intuitions that land is different than other forms of property?
One way in which natural resources (including land) are qualitatively different than other forms of property is that you can't make more of them (with minor exceptions). As a result, natural resources aren't the fruits of someone's labor.
One reaction is to say that no one should be able to individually own them, and that they should be collectively owned by the community. However, the history of the 20th century shows us that giving over the land to the state isn't a great idea either – governments aren't exactly known for making best use of opportunities to their best and highest use, to say the least!
Henry George proposed a different solution – tax the land rent while allowing private ownership. Land rent is the value of the property created by society rather than individual landowners (e.g. its location, views, and other natural resources), so taxing it would essentially recapture this socially-created value for public benefit.
While society is recapturing the socially-created value of the land, use of the land is in the hands of private actors who have the incentive to use it efficiently, so the system maintains the productivity benefits of private ownership while addressing issues of unearned wealth.
Markets are still generally the best tools we have for organizing human activity and resources, so by allowing private actors to own land but then simply tax them on the land rent leaves us with the best of both worlds!
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