single tax

Henry George whose writings form the basis for Georgism.

Georgism (also called Geoism or Geonomics) is an economic philosophy and ideology that holds that people own what they create, but that things found in nature, most importantly land, belong equally to all.^[1] The Georgist philosophy is based on the writings of the economist Henry George (1839–1897), and is usually associated with the idea of a single tax on the value of land. Georgists argue that a tax on land value is economically efficient, fair and equitable; and that it can generate sufficient revenue so that other taxes, which are less fair and efficient (such as taxes on production, sales and income), can be reduced or eliminated. A tax on land value has been described by many as a progressive tax, since it would be paid primarily by the wealthy, and would reduce income inequality.^[2]

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Main tenets

Henry George is best known for his argument that the economic rent of land should be shared equally by the people of a society rather than being owned privately. George held that people own what they create, but that things found in nature, most importantly land, belongs equally to all.^[1] George believed that although scientific experiments could not be carried out in political economy, theories could be tested by comparing different societies with different conditions and through thought experiments about the effects of various factors.^[3] Applying this method, George concluded that many of the problems that beset society, such as poverty, inequality, and economic booms and busts, could be attributed to the private ownership of the necessary resource, land.

In his publication Progress and Poverty George argued that: "We must make land common property."^[4] Although this could be done by nationalizing land and then leasing it to private parties, George preferred taxing unimproved land value. A land value tax would not penalize those had already bought and improved land, and would also be less disruptive and controversial in a country where land titles have already been granted.

It was Adam Smith who first noted the properties of a land value tax in his book, The Wealth of Nations:^[5]

Ground-rents are a still more proper subject of taxation than the rent of houses. A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground. More or less can be got for it according as the competitors happen to be richer or poorer, or can afford to gratify their fancy for a particular spot of ground at a greater or smaller expense. In every country the greatest number of rich competitors is in the capital, and it is there accordingly that the highest ground-rents are always to be found. As the wealth of those competitors would in no respect be increased by a tax upon ground-rents, they would not probably be disposed to pay more for the use of the ground. Whether the tax was to be advanced by the inhabitant, or by the owner of the ground, would be of little importance. The more the inhabitant was obliged to pay for the tax, the less he would incline to pay for the ground; so that the final payment of the tax would fall altogether upon the owner of the ground-rent.

A supply and demand diagram showing the effects of land value taxation. Note that the burden of the tax is entirely on the land owner, and there is no deadweight loss.

Standard economic theory suggests that a land value tax would be extremely efficient – unlike other taxes, it does not reduce economic productivity.^[2] Nobel laureate Milton Friedman agreed that Henry George's land value tax is potentially beneficial for society since, unlike other taxes, it would not impose an excess burden on economic activity (leading to "deadweight loss"). A replacement of other more distortionary taxes with a land value tax would thus improve economic welfare.^[6]

Georgists suggest two uses for the revenue from a land value tax. The revenue can be used to fund the state, or it can be redistributed to citizens as a pension or basic income (or it can be divided between these two options). If the first option were to be chosen, the state could avoid having to tax any other type of income or economic activity. In practice, the elimination of all other taxes implies a very high land value tax, higher than any currently existing land tax. Introducing a high land value tax would cause the price of land titles to decrease correspondingly, but George did not believe landowners should be compensated, and described the issue as being analogous to compensation for former slave owners. Additionally, a land value tax would be a tax of wealth, and so would be a form of progressive taxation and tend to reduce income inequality. As such, a defining argument for Georgism is that it taxes wealth in a progressive manner, reducing inequality, and yet it also reduces the strain on businesses and productivity.

Georgists also argue that all economic rent (i.e., unearned income) collected from natural resources (land, mineral extraction, the broadcast spectrum, tradable emission permits, fishing quotas, airway corridor use, space orbits, etc.) and extraordinary returns from natural monopolies should accrue to the community rather than a private owner, and that no other taxes or burdensome economic regulations should be levied. Modern environmentalists find the idea of the earth as the common property of humanity appealing, and some have endorsed the idea of ecological tax reform as a replacement for command and control regulation. This would entail substantial taxes or fees for pollution, waste disposal and resource exploitation, or equivalently a "cap and trade" system where permits are auctioned to the highest bidder, and also include taxes for the use of land and other natural resources.^{[citation needed]}

Synonyms and variants

Most early advocacy groups described themselves as Single Taxers, and George endorsed this as being an accurate description of the philosophy's main political goal – the replacement of all taxes with a land value tax. During the modern era, some groups inspired by Henry George emphasize environmentalism more than other aspects, while others emphasize his ideas concerning economics.

Some devotees are not entirely satisfied with the name Georgist. While Henry George was well-known throughout his life, he has been largely forgotten by the public and the idea of a single tax of land predates him. Some people now use the term "Geoism", with the meaning of "Geo" deliberately ambiguous. "Earth Sharing",^[7] "Geoism",^[8] "Geonomics",^[9] and "Geolibertarianism"^[10] (see libertarianism) are also preferred by some Georgists; "Geoanarchism" is another one.^[11] These terms represent a difference of emphasis, and sometimes real differences about how land rent should be spent (citizen's dividend or just replacing other taxes); but all agree that land rent should be recovered from its private recipients.

Influence

Georgist ideas heavily influenced the politics of the early 20th century, during its heyday. Political parties that were formed based on Georgist ideas include the Commonwealth Land Party, the Justice Party of Denmark, and the Single Tax League.

In the UK during 1909, the Liberal Government included a land tax as part of several taxes in the People's Budget aimed at redistributing wealth (including a progressively graded income tax and an increase of inheritance tax). This caused a crisis which resulted indirectly in reform of the House of Lords. The budget was passed eventually - but without the land tax. In 1931, the minority Labour Government passed a land value tax as part III of the 1931 Finance act. However, this was repealed in 1934 by the National Government before it could be implemented. In Denmark, the Georgist Justice Party has previously been represented in Folketinget. It formed part of a centre-left government 1957-60 and was also represented in the European Parliament 1978-79. The influence of Henry George has waned over time, but Georgist ideas still occasionally emerge in politics. In the 2004 Presidential campaign, Ralph Nader mentioned Henry George in his policy statements.^[12]

Communities

Several communities were also initiated with Georgist principles during the height of the philosophy's popularity. Two such communities that still exist are Arden, Delaware, which was founded during 1900 by Frank Stephens and Will Price, and Fairhope, Alabama, which was founded during 1894 by the auspices of the Fairhope Single Tax Corporation.

The German protectorate of Jiaozhou Bay (also known as Kiaochow) in China fully implemented Georgist policy. Its sole source of government revenue was the land value tax of six percent which it levied on its territory. The German government had previously had economic problems with its African colonies caused by land speculation. One of the main aims in using the land value tax in Jiaozhou Bay was to eliminate such speculation, an aim which was entirely achieved.^[13] The colony existed as a German protectorate from 1898 until 1914 when it was seized by Japan. In 1922 it was returned to China.

Georgist ideas were also adopted to some degree in Australia, Hong Kong, Singapore, South Africa, South Korea, and Taiwan. In these countries, governments still levy some type of land value tax, albeit with exemptions.^[14] Many municipal governments of the USA depend on real property tax as their main source of revenue, although such taxes are not "Georgist" as they generally include the value of buildings and other improvements, one exception being the town of Altoona, Pennsylvania, which only taxes land value.

Institutes and organizations

Various organizations still exist that continue to promote the ideas of Henry George. According to the The American Journal of Economics and Sociology, the periodical Land&Liberty, established in 1894, is "the longest-lived Georgist project in history".^[15] Also in the U.S., the Lincoln Institute of Land Policy was established in 1974 founded based on the writings of Henry George, and "seeks to improve the dialogue about urban development, the built environment, and tax policy in the United States and abroad".^[16] The Henry George Foundation continues to promote the ideas of Henry George in the UK.^[17] The IU, is an international umbrella organisation that brings together organizations worldwide that seek land value tax reform.^[18]

Criticisms

Although both advocated workers' rights, Henry George and Karl Marx were antagonists. Marx saw the Single Tax platform as a step backwards from the transition to communism. He argued that, "The whole thing is... simply an attempt, decked out with socialism, to save capitalist domination and indeed to establish it afresh on an even wider basis than its present one."^[19] Marx also criticized the way land value tax theory emphasizes the value of land, arguing that, "His fundamental dogma is that everything would be all right if ground rent were paid to the state."^[19]

On his part, Henry George predicted that if Marx's ideas were tried the likely result would be a dictatorship.^{[20][21][page needed]} Fred Harrison provides a full treatment of Marxist objections to land value taxation and Henry George in "Gronlund and other Marxists - Part III: nineteenth-century Americas critics", American Journal of Economics and Sociology, (Nov 2003).^[22]

George has also been accused of exaggerating the importance of his "all-devouring rent thesis" in claiming that it is the primary cause of poverty and injustice in society.^[23] More recent critics have claimed that increasing government spending has rendered a land tax insufficient to fund government.^{[citation needed]} Georgists have responded by citing a multitude of sources showing that the total land value of nations like the US is enormous, and more than sufficient to fund government.^[24]

Notable people influenced by Georgism

See also

• Excess burden of taxation
• Mutualism
• Freiwirtschaft
• Economic democracy
• Geolibertarianism
• Bolton Hall (activist), a proponent of the theory
• Progress and Poverty
• Protection or Free Trade
• Tragedy of the anticommons

Notes

External links

• Center for the Study of Economics
• Henry George Biography
• Henry George Foundation of America
• The Henry George Institute
• Henry George Papers, New York Public Library
• The Henry George School, founded 1932
• Prosper Australia (formerly the Henry George League)
• Robert Schalkenbach Foundation
• Understanding Economics
• Georgist Education Association
• Henry George Foundation, founded 1929
• Some mildly critical private comment