For a long time I’ve been a bit uncomfortable with the idea of income and/or sales taxes being the primary basis of government revenue, since it seems to be taxing the very activities we want to encourage. A greater emphasis on property (and most especially estate) taxes has seemed much less regressive and more likely to stimulate economic growth. More recently, I’ve also been intrigued by two other similar theories of taxation which seem more consistent with those same goals. My thoughts on both are more half-formed than usual, so I’ll probably ramble a bit, but rambling is that blogs are for.
The first theory is that of the Georgists () and geolibertarians (, ). Yes, I know there are differences between them, but there are more similarities. Their basic idea is that land is a special kind of property, which confers upon its owners a special kind of power, and that wealth and income disparities that exist even today can be traced back to morally unjustifiable royal grants of land going back at least to the feudal era; the very term “real estate” is etymologically derived from “real” = “royal”. The geolibertarians in particular seem heirs to a pretty rich philosophical tradition going back at least to Locke, whose labor theory of value recognized an important limitation which too many have subsequently ignored:
Though the earth and all inferior creatures be common to all men, yet every man has a “property” in his own “person.” This nobody has any right to but himself. The “labour” of his body and the “work” of his hands, we may say, are properly his. Whatsoever, then, he removes out of the state that Nature hath provided and left it in, he hath mixed his labour with it, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state Nature placed it in, it hath by this labour something annexed to it that excludes the common right of other men. For this “labour” being the unquestionable property of the labourer, no man but he can have a right to what that is once joined to, at least where there is enough, and as good left in common for others.
The problem, of course, is that there is not an infinite supply of land, and those who were left out of the royal land-grant process end up permanently screwed out of their just share of the wealth which derives from land ownership. Since nobody can live without some access to land, if all the land is already owned then any newcomers’ very survival is contingent on paying whatever rent the current owners choose to charge. This potential for extortion may be exercised to a greater or lesser degree, but is never absent and has played an important (some would say primary) role in creating most of the great historical fortunes. Even those who supposedly built their fortunes some other way are/were dependent and often beholden to previous owners of land-based wealth who invested in their enterprises. The Georgists and geolibertarians, recognizing this for a fact, say that the solution is to charge for the privilege of owning land. Furthermore, they claim, the revenue from such land rents or land value taxes would be sufficient to remove the need for other forms of taxation. Thus, taxes on income earned via labor can be replaced with much more justifiable tax on possession of a static asset to which the right of ownership (especially free and in perpetuity) is morally questionable. Obviously I disagree with the geolibertarians about how much revenue that should be, being more of a “geoliberal” myself, but their pages which I cite do an excellent job of explaining both the moral and practical justification for such a tax.
Don’t stop reading yet; there’s more.