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Nic Tideman

Peace, Justice and Economic Reform   [one of the essential documents]
A Bill of Economic Rights and Obligations
The Case for Taxing Land
The Case for Site Value Rating
Applications of Land Value Taxation to Problems of Environmental Protection, Congestion, Efficient Resource Use, Population, and Economic Growth
Basic Principles of Geonomics
Basic Tenets of the Incentive Taxation Philosophy
Comments on the NTIA's Comprehensive Policy Review of Use and Management of the Radio Frequency Spectrum
Being Just While Conceptions of Justice are Changing
The Constitutional Conflict Between Protecting Expectations and Moral Evolution
Global Economic Justice, followed by Creating Global Economic Justice
The Interaction of Moral and Economic Approaches to Ecological Protection
Economics Nobel Awarded for Contributions in Public Finance
The Interaction of Moral and Economic Approaches to Ecological Protection
The Ethics of Coercion in Public Finance
Farm Land Rent and the Renewal of Rural Society: The Self-Financing Model

Improving Efficiency and Preventing Exploitation in Taxing and Spending Decisions
Land Taxation and Efficient Land Speculation
The Political Economy of Moral Evolution
Coercion Decision Tree

Recommendations for a Society in Transition
Market-Based Systems for Assigning Rental Value to Land
Private Possession as an Alternative to Rental and Private Ownership for Agricultural Land
An Open Letter to Mikhail Gorbachev, signed by 30 economists (November, 1990)

Peace, Justice and Economic Reform
   [one of the essential documents]

There is a bumper sticker that says, "If you want peace, then work for justice." At a superficial level, this simple slogan contains an important half-truth. At a deeper level, it contains a more profound half-truth. To understand these half-truths and why they are only half true, we need to know what peace is, what justice is, and we need to understand the relationship between the two. So in this talk I want to explore the meanings of peace and justice, their relationship, and the role of economic reform in attaining both.

"If you want peace, then work for justice." The more obvious and superficial meaning of this slogan is that people who are treated unjustly will prevent the attainment of peace until the wrongs to which they are subject are righted. Demonstrators shout: "No justice. No peace." The apparent meaning of peace in this case is tranquility, the absence of strife. And if this meaning of peace is accepted, the slogan is true. You cannot expect to end strife as long as people have unresolved grievances. But the reason that this is only half true is that this meaning is only a shadow of what peace really is.

Peace is more than armistice, more than the cessation of violence. Peace is unity and harmony. In a peaceful world people are all pleased to cooperate with one another. When we have attained true peace, there will be no person who has any purpose that any other person seeks to thwart. In a peaceful world, everyone will feel the truth of John Donne's meditation,

No man is an Island entire of itself; every man is a piece of the Continent; a part of the main; if a clod be washed away by the sea, Europe is the less, and well as if a promontory were, as well as if a manor of thy friends or of thine own were; any man's death diminishes me because I am involved in Mankind; therefore never send to know for whom the bell tolls; it tolls for thee.[1]

Is it imaginable that we might ever attain a world where everyone felt so? And if we do so, what will be the role of justice in that world? What is justice?

There are so many conflicting, strident claims for different conceptions of justice that a person might reasonably despair of ever finding a meaning of justice that people would agree upon. Any conception of justice may seem to be no more than one person's opinion. And yet there are things that we all know about justice. If I tell you that I stand before you as justice, you know that across my face you will find -- a blindfold. In my left hand I hold aloft -- a pair of scales. You know that in my right hand I have -- a sword that I will use if necessary. And my gender is female.

The blindfold, the scales, the sword, and the feminine gender. These features of the traditional symbol tell us much about justice. The blindfold might seem out of place, since it prevents justice from either seeing what the scales say or wielding the sword effectively. But we know that the blindfold has a distinct and essential meaning. The blindfold ensures that justice will not be swayed by any visible characteristics of those who plead before her. Justice is not concerned with whether you are black or white, short or tall, beautiful or ugly. Every person receives the same treatment from justice.

The scales have at least two possible interpretations. ...

And then the sword. The sword represents the fact that justice is prepared to use the threat of force, and force itself, to see that her decrees are carried out. ...

Thus if we know that justice is the blindfolded woman with the scales and the sword, then we know that justice is the principles of equality and evenhandedness that command and prohibit the use of force in resolving conflicts.

Consider what this tells us. It tells us first that if we wish to claim that justice authorizes the force we wish to use, or that justice forbids the force that others wish to use against us, then we must be able to show that our claim is consistent with equality and evenhandedness. ...

Second, the blindfold tells us that we are not in the realm of justice if the principles we offer to explain why our use of force is justified are of the form, "Because I am better than you," or Hitler's, "Because Aryans are better than Jews." Justice compels us to acknowledge the equality of all persons. Claims of individual or group supremacy cannot be accepted by justice.

Third, not only are all persons equal in the blindfolded eyes of justice, but their different goals in life all deserve equal respect. ...

Even the utilitarian proposal that conflicting claims should be settled in the way that yields the greatest possible utility must be rejected as an elitist imposition of a particular goal on people who may have other plans. If I choose to pursue a life that can be guaranteed to lead to depression and despair, I have as much claim to the protection of justice in that pursuit as if I choose the path that leads to bliss. Justice must be neutral in its evaluation of people and their goals. ...

If we commit ourselves to neutrality, does that provide a unique definition of justice? No, it doesn't. There are a number of definitions of justice that might claim to satisfy neutrality, although the claims of some definitions are dubious, and other definitions can be rejected on other grounds.

Consider first the conservative claim that justice is defined by traditional rules.  ...

Next, consider the claim that justice is defined by what the majority wants. The majoritarian says, "If you want to know who should prevail in a conflict, take a vote." As appealing as majoritarianism may be on the surface, it cannot provide a coherent theory of justice. ...

If voting cannot be used to define justice, one might entertain the possibility of using a contractarian formulation: What is just is the rules to which people would have agreed if they did not know their personal circumstances.  ...

This is a reasonable recipe for implementing the Golden Rule and a fine idea for seeking agreement about the principles by which complaints shall be judged. If people were to follow this suggestion and achieve the agreement that is described, they would achieve fairness.

However, this does not make Rawls's suggestion a good way to identify justice.  ...

Next, consider egalitarianism. The egalitarian says that justice is equality. There is a conceptual difficulty in specifying how beings as different from each other as humans are could ever be equal, unless we create a society where all humans are female clones of one another. (This should be technologically feasible within a few decades, if it is not already.) But I do not think that egalitarians want a society of clones. ...

John Rawls has proposed that the talents that individuals possess be regarded as a common pool, so that anyone who has more than his share has an obligation to compensate those who have less then their shares. ...

All of these suggestions should be rejected. Talents are not a common pool from which some persons have taken more then their shares. If we are all fishing in the same pond, the quantity of fish that you take will diminish the quantity that is available to me. But the quantity of talent that you have in no way diminishes the quantity that is available to me. Your talent is not acquired at my expense.

From the perspective of peace, no man is an island; each of us is a part of mankind. And any of us who has been graced with an extra measure of talent should recognize that, often, the best use of our talent is to provide for others. Nevertheless, from the perspective of justice, each of us must be allowed to act like an island if he wishes. .

Suppose that a bone-marrow transplant from me would save your life--or at least prolong it. ...
If you do not mind requiring a bone-marrow transplant of me, then what about a kidney? ...
If you do not mind requiring me to donate a kidney, then what about my heart?  ...

A good egalitarian should require me to part with the one available heart after I have had my share of years.

But I don't think you would. I don't think anyone would. We are not egalitarians. We recognize the sanctity of the boundaries of the human body. In a peaceful world I will gladly give a spare kidney to anyone who needs it. But in a just world, no one will forcefully extract a kidney from me, even to save someone else's life. Justice is not egalitarianism.

Just as I own my kidneys, so do I own my talents. In a peaceful world I will use them for the benefit of all mankind. But the sword of justice should not be used to force me to compensate those with less talent. Nor should it be used to force me to abide by the insurance contract that you believe I would have signed, if I had had the chance, before I knew what talents I would have. ...

A proper definition of justice begins with the principles of classical liberalism. In a just world each person is permitted to determine the purposes to which his or her body is put--the hands and the brain no less than the kidneys. We each have rights of self-determination. This includes the right of ownership of what we produce, at least, as John Locke said, when we leave as much in natural opportunities for others as we appropriate for our own productive activities.[11]

We have the right to co-operate with whom we choose for whatever mutually agreed purposes we choose. Thus we have the right to trade with others, without any artificial hindrances, and we have the right to keep any wages or interest that we receive from such trading.

These components of the classical liberal conception of justice are held by two groups that hold conflicting views on a companion issue of great importance: how are claims of exclusive access to natural opportunities to be established?

John Locke qualified his statement that we own what we produce with his famous "proviso" that there be "as much and as good left in common for others." A few pages later, writing in the last decade of the seventeenth century, he said that private appropriations of land are actually not restricted, because anyone who is dissatisfied with the land available to him in Europe can always go to America, where there is plenty of unclaimed land.[12]homesteading libertarians Locke does not address the issue of rights to land when land is scarce. One tradition in classical liberalism concerning claims to land is that of the ""  ...

The other tradition is that of the "geoists," as inspired if not exemplified by Henry George, who say that, whenever natural opportunities are scarce, each person has an obligation to ensure that the per capita value of the natural opportunities that he leaves for others is as great as the value of the natural opportunities that he claims for himself.[14] Any excess in one's claim generates an obligation to compensate those who thereby have less. George actually proposed the nearly equivalent idea, that all or nearly all of the rental value of land should be collected in taxes, and all other taxes should be abolished. The geoist position as I have expressed it emphasizes the idea that, at least when value generated by public services is not an issue, rights to land are fundamentally rights of individuals, not rights of governments.

There are two fundamental problems with the position of homesteading libertarians on claims to land.  ...

The second fundamental problem with the position of the homesteading libertarians is that, even if there were previously unsettled land to be allocated, say a new continent emerging from the ocean, first grabbing would make no sense as a criterion for allocating land.

It would be inefficient, for one thing, as people stampeded to do whatever was necessary to establish their claims. But that is not decisive because, if we are concerned with justice, it might be necessary for us to tolerate inefficiency. But the homesteading libertarian view makes no sense in terms of justice. "I get it all because I got here first," isn't justice.

Justice -- the balancing of the scales -- is the geoist position, "I get exclusive access to this natural opportunity because I have left natural opportunities of equal value for you."  ...

Justice is thus a regime in which persons have the greatest possible individual liberty, and all acknowledge an obligation to share equally the value of natural opportunities. Justice is economic reform--the abolition of all taxes on labor and capital, the acceptance of individual responsibility, the creation of institutions that will provide equal sharing the value of natural opportunities. ...

Getting back to where we started, is it true that, "If you want peace-- real peace--you should work for justice?" and if so why? Well, it's half true. To see why, consider what peace is, and how one might create it.

Peace is unity and harmony. Peace is people recognizing that we are all parts of one another, that it is always for ourselves that the bell tolls.

What keeps us from attaining peace? One of the greatest hindrances to the attainment of peace -- real peace -- is that resistance that so many of us feel to tolerating oppression and injustice. When we know that we, or others we care for, have been treated unjustly, it is ever so difficult to attain a state of unity and harmony with others. The leap to peace is so much easier from a position of justice. So, even though peace and justice are very disparate things, and peace is much the more attractive one, still it make sense, if you want to help people reach peace, to work for justice.

But the reason that this is only half true is that, in fact, justice is not actually necessary to your attainment of peace. If you want peace for yourself, you can have it, at any time, in any circumstances in which you find yourself. Whether you are treated justly or not, you are a part of the being that is all humanity. Each person's joy is your joy. Each person's grief is your grief. You don't have to wait until you are treated justly to see this.

So if you want a peace for others, then work for justice. Work for freedom. Work for the elimination of all taxes on the productive things that people do. Work for equality in the right to benefit from natural opportunities. All these things will make it easier for people to make the leap to peace.

But if you want peace for yourself, simply have it.  Read the entire article

A Bill of Economic Rights and Obligations

Our nation was founded on the idea that we are all created equal, that we are endowed by our Creator with certain inalienable rights, and that among these are life, liberty, and the pursuit of happiness.

In living, expressing our liberty, and pursuing happiness we sometimes conflict with one another, so we need a shared understanding of the extent of the sphere of equal rights given to every person, and beyond that sphere our obligation to respect the rights of others. This Bill is concerned with the economic aspects of these rights and obligations. ...  Read the entire article

The Political Economy of the Gospels

The message of the Gospels is that our sins are forgivable, that death is not to be feared because our true lives are spiritual rather than physical, and that participation in the kingdom of God -- a new and better life in this world as well as the next -- is accessible to all who orient themselves to God.

Drawing on the Old Testament, Jesus taught that our first commandment is that we love God with all our heart, and all our soul, and all our mind, and all our strength, and that our second commandment is that we love our neighbor as ourselves.1 When asked who our neighbor is, he replied with the parable of the good Samaritan, implying that anyone we encounter is our neighbor. 2 Jesus taught an ethic in which there are no bounds on our obligations to others:  ...

When asked by Peter, "Lord, how oft shall my brother sin against me, and I forgive him? till seven times?" Jesus replied, "I say not unto thee, Until seven times: but, Until seventy times seven."  In other words, we are to forgive indefinitely.

This unbounded obligation to others is reconciled with the need to survive through the introduction of the idea that it is not through our own anxious efforts, but through God's provision for us that we survive: ...

The message of the Gospels denies the validity of concern for material scarcity. This is made particularly clear in the accounts of the feeding of the multitudes with just a few loaves and fishes.

comprehending this counterintuitive idea, that material scarcity is not to concern us, is brought out by the accounts of how even Jesus' disciples did not understand the message: ...

Without a concept of material scarcity it is difficult to construct an economic theory, as material scarcity is central to economic theory. And yet, even without a concept of material scarcity there is an allocation problem to be solved--the allocation of our efforts.

In the parable of the talents we are told that we will be expected to accomplish something with the resources that are put into our hands. 8 This parable is followed in Matthew by a teaching that may be taken as an indication of what constitutes accomplishment: ...

In other words, every person is a manifestation of God, and anything that we can do to help anyone is to our credit.

There is thus an unlimited task for each of us. No one of us will ever be able to say, "I have done every last thing that might be required of me. I have no further obligations." But neither are we to be concerned that that which we have left undone might be held against us. For if we refrain from judging others, we ourselves will not be judged:  ...

With this message of the Gospels in mind, turn now to the problem of political economy, the problem of what principles ought to govern the organization of the production of goods and their distribution.

One might first ask whether the requirement that we abandon concern for scarcity would preclude production. The answer is no, it is not production that we are cautioned to avoid, but anxiety. There are any number of reasons why we might allocate some of our time to production, without being anxious about our own material requirements. We feel called to undertake a particular kind of work, so we do it, trusting that any material needs we may have will be satisfied. If we want to undertake our productive activities in conjunction with others, that's fine, too. Associating with others provides us with opportunities to be useful to them.

Among those who are close to us there is no need for prices and markets, because we can see easily enough how we can be of service to them. But human discernment is limited, and prices and markets help us to be aware of what is valued by people who are less close to us. ...

Refraining from the use of force is a recurring theme in the political economy of the Gospels. We are called to refrain from the use of force in defense of property. We are called to refrain from the use of force in financing public activities. We are called to refrain from the use of force in providing for those who might otherwise lack. And we show our love for those who do not wish to participate in our political economy by leaving for them the same per capita value of land and natural resources that we claim for ourselves.

Consider now how this framework bears on some traditional questions of economic ethics. Take first the problem of the just price. This simply is not an issue. If two people have the opportunity to trade--to cooperate--on terms that are mutually agreeable to the two of them, it is not for us to say that they ought to be trading on other terms. Between people who love one another, the problem of settling on the terms of trade is no more difficult than the problem when friends eat lunch together of deciding who will pick up the tab, or how it will be split.

That those outside a relationship are not called upon to prescribe its terms is supported by a passage from Luke: ...

Relations between employers and employees are a special case of relations between traders. ...
The problem of worker management is not a problem either. ...

Corporate responsibility may be more of an issue for a Gospel-based political economy. The corporate form of organization permits us to participate in the establishment and management of firms while knowing very little about the other people with whom we are involved or the actions that are taken on our behalf. If this leads us to support implicitly actions of managers in their concern for the bottom line that we could not in good conscience take ourselves, then there is something troubling about our participation in corporations. We need to find ways of managing the resources under our control that do not lead us to endorse implicitly and to profit from actions that we would not endorse directly or take ourselves.

The grand question of economic ethics, the question of whether capitalism or socialism is the more appropriate form of political economy, is another non-question from the perspective of the Gospels. Everyone who wants to live under socialism should be free to live under socialism, and everyone who wants to live under capitalism should be free to live under capitalism. In whichever group we fall, we will want to insure that those who want to organize their lives by different principles of political economy have their share of land and natural resources with which to do so.

A political economy based on the Gospels is a political economy based on love. As the First Epistle of John says, "There is no fear in love; but perfect love casteth out fear."17 To construct a political economy of the Gospels we must be free of fear: free of fear that others may rob us; free of fear that others may not contribute to the provision of public goods or to provision for those who might otherwise lack; free of fear that our incomes will be too low or the prices we face too high; free of fear that if we don't do something, someone will be exploited. Only when love has replaced all fear in our hearts will we be able to construct the political economy of the Gospels. Read the whole article

The Shape of a World Inspired by Henry George

How would the world look if its political institutions were shaped by the conception of social justice advanced by Henry George?

Henry George was one of the most famous reformers of the late 19th century. Ever since the 1879 publication of his book, Progress and Poverty, his ideas have inspired people working for economic and social reform all around the world. He is most famous for proposing the abolition of all taxes except for a tax on the value of land. But I will argue that the single tax on land was not George's most important contribution, and that the power of his thinking can be best appreciated by focusing on the theory of social justice that he used to explain why a single tax on land is just.

First I will argue that George's theory of social justice provides the dramatic climax as well as the logical foundation of Progress and Poverty.

Next, I will discuss the functions of a theory of justice.

Then I will address the question of what George's theory of social justice implies for relations among nations.

Finally, I will ask what constitutes justice within nations, in a world where relations among nations are governed by George's theory of social justice.

I. Social Justice as the Climax and Logical Foundation of Progress and Poverty
II. The Functions of a Theory of Justice
III. Applying George's Theory of Justice to Land Rights Among Nations
IV. Applying George's Theory of Justice to Some Other Connections Among Nations
V. Differences in Ability and in Wealth
VI. Resources that Fluctuate over Time
VII. Justice Among Nations with Respect to Population Growth
VIII. What to Do When Some Nations Fail to Fulfill Their Obligations
IX. Justice Within Nations
X. Conclusion     Read the whole article


The Morality of Taxation: The Local Case

From a moral perspective, taxation is dubious or worse. We tell our fellow citizens that if they do not pay taxes that we say they owe, their property will be seized or they will be sent to prison. Why do we treat people this way? Is there a justification?

The dubiousness of taxation increases when we consider its origins. Government seems to have originated as roving bandits who learned that total destruction was less profitable than protecting their victims from other bandits and allowing them to keep a fraction of what they produced (Olson, 1993). In time, scheduled partial plunder evolved into taxation. Over the centuries, regimes that started as tyrannies evolved into democracies. The public sector evolved from an apparatus for implementing the will of despots into a mechanism for carrying out democratic decisions. But public finance continues to rely on the power of tax collectors, developed under early tyrants, to coerce citizen to pay taxes. The wrath that citizens feel toward tax collectors is probably the strongest antagonistic feeling that citizens have toward a governmental institution. Why do we allow ourselves to do this to one another?

There is a gentler side of taxation that provides some explanation of our tolerance of this coercion. Taxation can be the way that people achieve their common purposes. People may agree to be taxed so that there will be money to pay for public services that they want. From this perspective, taxation may be considered no more than the dues for belonging to a club that provides people with things that they would rather pay their share of than do without. However, to make this "voluntary exchange" theory of taxation relevant, people must be able to choose freely whether or not to "join the club," to be a citizen of the taxing jurisdiction. With all land claimed by some taxing jurisdiction, the choice isn't exactly free.

The problem of morality in taxation is the following:

  • How do we retain the possibility of people pooling their contributions to the cost of services that they agree are worthwhile, while eliminating the possibility of citizens treating their fellow citizens as targets of plunder?
  • What are the limits of obligations that we can justly impose on our fellow citizens?
  • And how do we set up a structure of government that will ensure that these limits are observed? ...
we would probably have a much more efficient public sector if every public expenditure required two-thirds approval in legislative bodies.

But to make taxation truly voluntary, the option to leave must be viable. If people could move costlessly from one jurisdiction to another, taking all of their belongings with them, then competition among jurisdictions would tend to eliminate oppressive taxation. This would leave only the fees that people were prepared to pay to have public services (Tiebout, 1956).

Of course, moving will always have some costs, so the ideal will not be attainable. But what can be imagined is a system in which all taxes were local taxes. Then people would not have to move nearly as far to escape from taxes that they regarded as oppressive. Higher levels of government would not need to disappear; if the services that they provide are desired, they could be financed by levies on lower levels of government. ...

...Thus communities would not be able to raise much revenue from income tax or taxes on capital before they would drive residents and investment away. It might seem that there would be no way that localities could finance themselves.

Such a conclusion would be unwarranted, because there is a very significant source of public revenue that can survive when localities compete for mobile residents. This source is land. When people are taxed in proportion to the land they possess, no land moves to another locality where taxes are lower. Thus two questions arise:

  • Would taxes on land be sufficient to finance the public activities that ought to be undertaken, and
  • would such a system be fair?  Read the whole article
The Case for Taxing Land
I.  Taxing Land as Ethics and Efficiency
II.  What is Land?
III.  The simple efficiency argument for taxing land
IV.  Taxing Land is Better Than Neutral
V.  Measuring the Economic Gains from Shifting Taxes to Land
VI. The Ethical Case for Taxing Land
VII. Answer to Arguments against Taxing Land

There is a case for taxing land based on ethical principles and a case for taxing land based on efficiency principles.  As a matter of logic, these two cases are separate.  Ethical conclu­sions follow from ethical premises and efficiency conclusions from efficiency principles.  However, it is natural for human minds to conflate the two cases.  It is easier to believe that something is good if one knows that it is efficient, and it is easier to see that something is efficient if one believes that it is good.  Therefore it is important for a discussion of land taxation to address both question of efficiency and questions of ethics.

This monograph will first address the efficiency case for taxing land, because that is the less controversial case.  The efficiency case for taxing land has two main parts. ...

To estimate the magnitudes of the impacts that additional taxes on land would have on an economy, one must have a model of the economy.  I report on estimates of the magnitudes of impacts on the U.S. economy of shifting taxes to land, based on a mathematical model that is outlined in the Appendix.

The ethical case for taxing land is based on two ethical premises:  ...

The ethical case for taxing land ends with a discussion of the reasons why recognition of the equal rights of all to land may be essential for world peace.

After developing the efficiency argument and the ethical argument for taxing land, I consider a variety of counter-arguments that have been offered against taxing land.  For a given level of other taxes, a rise in the rate at which land is taxed causes a fall in the selling price of land.  It is sometimes argued that only modest taxes on land are therefore feasible, because as the rate of taxation on land increases and the selling price of land falls, market transactions become increasingly less reliable as indicators of the value of land.   ...

Another basis on which it is argued that greatly increased taxes on land are infeasible is that if land values were to fall precipitously, the financial system would collapse.   ...

Apart from questions of feasibility, it is sometimes argued that erosion of land values from taxing land would harm economic efficiency, because it would reduce opportunities for entrepreneurs to use land as collateral for loans to finance their ideas.  ...
Another ethical argument that is made against taxing land is that the return to unusual ability is “rent” just as the return to land is rent.  ...

But before developing any of these arguments, I must discuss what land is. ... Read the whole article
The Case for Site Value Rating
The Social Justice of Site Value Rating
The Efficiency of Site Value Rating
How Valuations would be Made

Both for reasons of social justice and for reasons of economic efficiency, site value rating deserves a continued place in the programme of the Liberal Party.

The case for site value rating in terms of social justice is founded on two understandings: first, that the value of land in the absence of economic development is the common heritage of humanity, and second, that increases in the rental value of land arising from economic development and government expenditures should be collected by governments to finance those activities. What is meant by "land" is the unimproved value of sites and the value of extractable natural resources such as North Sea oil.

While there may someday be institutions capable of implementing a recognition of land as the heritage of all humanity on a worldwide basis, in the absence of such institutions each nation should implement a recognition that land within its boundaries is the common heritage of its citizens. This is accomplished not by making the nation a gigantic Common or by instituting government management of all land, but rather by requiring all persons and corporations that are granted the use of land to pay a fee or tax equal to what the rental value of the land they control would be if it were in an unimproved condition.

The case for site value rating in terms of economic efficiency is founded on the fact that a tax on resources that are not produced by human effort is one of the few sources of government revenue that does not reduce incentives for people to be productive. Two other revenue sources that have this virtue are taxes on other government-granted privileges such as exclusive use of radio frequencies and taxes on activities with harmful consequences, such as polluting the air. An economy will be more efficient if revenue sources that do not diminish productivity are employed to the greatest possible extent before any use is made of taxes that impede productivity.

What makes a tax efficient is that the amount of tax that is due cannot be reduced by reducing productive activities. When incomes are taxed, people can reduce the amount of taxes owed by working less. They do so, and the productivity of the economy falls. When houses are taxed, people can reduce the amount of taxes owed by building fewer house and smaller houses. They do so, and the housing shortage worsens. But when the unimproved value of land is taxed, there is no resulting diminution in the quantity of land. Thus taxes can be levied on land without diminishing the productivity of an economy. And shifting taxes from other, destructive bases to land will improve the productivity of an economy.

Subsequent sections explain in more detail these social justice and efficiency arguments for site value rating, describe procedures for implementing such a tax system, and explain why a variety of potential objections are without merit.

... The idea that the benefits of land, which no one produced, can be directed to a privileged few has no basis in justice. It is as anachronistic as a property qualification for voting. The gift of nature should justly be regarded as the common heritage of all citizens.A substantial part of the value of land is not the gift of nature but rather the result of economic growth and the provision of public services. This increase in the value of land above its value in a natural condition is the product of economic development and government activity, and should justly be regarded as the natural source of income for financing the activities that generate the increase in the value of land.  ... Read the whole article

Applications of Land Value Taxation to Problems of Environmental Protection, Congestion, Efficient Resource Use, Population, and Economic Growth

I. Justifications of Land Value Taxation
II. Applications to Environmental Protection
III. Applications to Congestion
IV. Applications to Resource Use
V. Resources with Issues of Appropriate Use Over Time
VI. Population Growth
VII. Economic Growth
VIII. An Estimate of the Magnitudes of the Consequences of Taxing Land
IX. Conclusion

When economists think about the contribution that land value taxation might make to economic performance, they are likely to think in terms of property tax reform. If taxes on structures are reduced or eliminated, one can expect that more structures will be built, and cities will be taller, more compact and more efficient.1 But more efficient cities are only the beginning of the contribution that land value taxation can make to improving economic performance. Land value taxation generalizes into the principle that people should pay for all of their appropriations of natural opportunities, according to the opportunity costs of those appropriations, and the resulting revenue should be shared equally. There are important applications of this principle to questions of environmental protection, relieving congestion, efficient resource use, population growth, and general economic growth. This paper discusses these more varied applications of the generalized principle of land value taxation. ...

I have a spreadsheet that takes parameters such as the ones named and determines what would happen (in a comparative static framework) if all taxes were removed from labor and capital, and 100% of the rent of land were taxed. Here are the results:

  • The quantity of labor would increase by 55%.
  • The quantity of capital would increase by 145%.
  • Output would increase by 53%.
  • The wage before taxes would fall by 1.7%, but the wage after taxes would increase by 72%.
  • The rent of land would increase by 87%, and would provide more than enough revenue for all existing expenditures of all levels of government in the U.S., other than social security.
  • The aggregate improvement in well-being of citizens would be about 12.6% of output, or about $1 trillion per year.

I would like to do more work with plausible ranges of parameters. But the model at least indicates that it is not unreasonable to expect dramatic improvements in economic growth from land value taxation, without reducing total government revenue.

Land value taxation generalizes to the principle that all persons have equal rights to natural opportunities and should therefore pay for their above-average appropriations of natural opportunities. This principle has the potential to contribute to the efficiency and fairness with which a wide variety of economic problems are handled. This paper considers in particular applications to pollution, congestion, use of scarce natural resources, and population growth. The revenue raised by managing these issues efficiently, as well as by the more traditional application of land value taxation, permits the removal of taxes on labor and capital, with the potential to unleash a tremendous increase in economic growth and consequent improvement in human welfare. ... Read the entire article
Basic Principles of Geonomics
A geonomy respects the freedom of individuals, the limits of the environment, and the claims of future generations. Individuals must be free to organize their economic lives as they wish, within bounds determined by the equal freedom of others and the recognition that land, natural resources and environmental amenities are the common heritage of all generations. ...

To summarize, the basic principles of geonomics are:

1. Equal sharing of land and natural resources, achieved by:

a. public collection of the rental value of land and of appropriate fees for broadcast rights and other opportunities that must be assigned exclusively, for depletion of natural resources, and for causing pollution or engaging in other activities that reduce the value of surrounding land;b. equal sharing among the population of that part of rent and other public revenue not attributable to public services;

2. Elimination of taxes on labor, capital and enterprise, limiting government revenue to the items mentioned in 1.a. above;

3. Economic freedom, encompassing free enterprise, free trade, and freedom to use foreign currencies;

4. Assignment of the ownership of previously centralized enterprises to all workers in proportion to the number of years they have worked, through shares in mutual funds whose managers are rewarded in proportion to the profits earned. ...  Read the whole article

Basic Tenets of the Incentive Taxation Philosophy

  • Equal Rights
  • Ending Privilege
  • Equal Rights to Land
  • The Proper Disposition of Returns to Different Factors of Production
  • Replacing Existing Taxes
  • Reducing the Price of Land
  • The Importance of Constitutional Change
  • Historical Precedents
  • Creating a More Productive Economy
  • Making Housing Affordable
  • Applications Abroad as Well as at Home

Comments on the NTIA's Comprehensive Policy Review of Use and Management of the Radio Frequency Spectrum

Being Just While Conceptions of Justice are Changing
A conception of justice is a framework for resolving questions of what liberties people ought to have. The smooth functioning of society requires substantial consensus about conceptions of justice, because without such consensus, people will take actions and make claims on resources that others regard as intrusions upon what is properly theirs. This can be expected to lead, at a minimum, to disharmony and possibly to violent conflict. On the other hand, when people agree on a conception of justice and who is competent to interpret it, conflicts will be less likely to arise, and those that do arise can be settled more easily. Thus there is strong impetus toward stability in any society's conception of justice: Any doubts about a shared conception of justice may be suppressed or hidden to preserve the advantages of consensus.
Moral evolution, however, can require conceptions of justice to change, as when the world came to recognize that slavery could not be just, or that women must be accorded the same civil rights as men. When, as with the abolition of slavery, a new conception of justice entails the elimination of the sale value of what had previously been assets, there will be calls for compensation, on the ground that, as provided in the fifth and fourteenth amendments to the U.S. Constitution, governments should not take property without compensation. ...

The paper argues that there are a variety of factors that attenuate claims for compensation and make a justifiable system of compensation so complex that it may be unworkable. But if there is to be a system of compensation, the one justifiable source of funds to finance it is assets that have been acquired by appropriating or buying land and then selling it. ...

The issue of compensation will be examined by considering some idealized cases, identifying the principles they exhibit, and then asking how those principles apply to the circumstances in which modern societies are likely to find themselves. ...
Case 1. A republic of the former Soviet Union privatizes land by selling it to the highest bidders ...
Case 2. There is an agricultural society that has been using a rule that whoever plants on land first in any year owns the harvest of that land that year.  ...
Case 3. This is a variation on Case 2. First the land is divided equally among existing families, with an understanding that land rights will be tradable.  ...
Case 4. There is an agricultural society in which land is initially redivided equally each year among all adults. ...
Case 5. Land has been privately owned and rather equally distributed since time immemorial. One day people suddenly realize that land should be regarded as the heritage of all citizens. ...
Case 6. This is a variation on case 5, where the recognition that equal access to land should be a birthright occurs gradually, over decades ...
Case 7. This is a variation on case 6, where there are initially substantial taxes on labor and capital. ...

Having considered these seven idealized cases, one can now summarize the principles they embody.

  • Case 1 and 2 both embody the principle that when a mistake in social rules is corrected, it is reasonable to require people to relinquish the expectations that the mistaken rules gave them. In one case this implied that compensation for the loss of sale value of land titles should be provided, in the other case that it should not be provided.
  • Case 3 embodies the principle that it is sometimes appropriate to restructure past private transactions on the basis of new understandings of the requirements of justice.
  • Case 4 embodies the principle that the perpetrators of injustice and their heirs are particularly responsible for providing compensation when the claims they appropriated are overturned.
  • Case 5 embodies three principles:
    • first, that there can be circumstances in which the costs of a new moral understanding must be left where they fall, because there is no one to whom they can properly be shifted;
    • second, that compensation financed by taxation should be supported by a finding that those who are taxed are, as a class, particularly responsible for, or have been beneficiaries of, the discredited understanding;
    • third, that if compensation is provided, a person's past gains from the discredited understanding offset claims for losses from the new understanding.
  • Case 6 embodies the principle that public moral debate puts people on notice that a future political decision might eliminate the value of their acquisitions without compensation.
  • Case 7 embodies the principle that if compensation is provided, a person's past benefits from the new understanding offset claims for losses from the new understanding.
One can now ask what lessons these principles hold for the situations in which actual societies are likely to find themselves.  ...   Read the whole article
The Constitutional Conflict Between Protecting Expectations and Moral Evolution
Constitutions must be amendable, to allow for the possibility of incorporating new moral insights into them. This impinges on the protection of expectations, including those regarded as property. Protection of property rights is achieved by constitutional restrictions on the ability of voters and legislators to reduce the value of property by regulation, taxation or expropriation. But such restrictions also prevent voters and legislatures from reflecting new moral insights in legislation, if those insights would reduce the value of property. There have been times in the past when moral development has compelled societies to change laws in ways that reduced the value of property (e.g., elimination of slavery). We cannot guarantee that there will be no future advances in our moral evolution that would require similar changes in laws, reducing or eliminating the value of what we now consider property. Looking forward to the possibility of such moral advances, we should design constitutions that permit amendments to reflect new moral insights, while prohibiting legislators (or voters in referenda) from passing laws that redistribute in ways not explicitly sanctioned by the constitution.

1. The Possibility of New Moral Insights that Necessitate Redistribution
2. Assigning the Costs of Moral Accidents
3. The Possibility of a Right of Secession
4. The Complementary Right of Equal Access to Natural Opportunities
5. Power, Population and Process
  ...  Read the whole article

Global Economic Justice, followed by Creating Global Economic Justice

I. The Functions of a Theory of Justice
II. Henry George's Principles of Justice
III. Applying the Theory of Justice to Land Rights Among Nations
IV. Applying the Theory of Justice to Other Connections among Nations
V. Differences in Ability and in Wealth
VI. Resources that Fluctuate over Time
VII. Justice and the Demographic Equation
VIII. Conclusion

Humanity is emerging from eons of development during which survival has been promoted both by the ability to grab resources from others and by the ability of groups to cooperate and share natural resources within communities that occupied territorial homelands. In recent centuries we have been developing a consensus that taking from the weak is wrong, and that we ought to have a social order that prevents all such behavior. But we have not yet worked out how to do it.

Some people think of preventing grabbing in terms of preserving the status quo. There are two difficulties with this.

  • First, the status quo incorporates extensive holdings that were acquired by indefensible means. A decision to preserve the status quo commits us to defending the indefensible.
  • Second, there is no magic to any particular date, before which unjust appropriations are incorporated into the status quo and after which they are reversed.

A practice of allowing an appropriation to be treated as just if it has survived long enough gives aggressors an incentive to see if they can grab and hold on long enough. The result is actions like Indonesia's seizure of East Timor and Iraq's invasion of Kuwait. Only if we have a standard of justice that is independent of history can we expect to end such actions.

Henry George's theory of economic justice--that every person has a right to his or her productive powers, and that all persons have equal rights to all natural opportunities--provides a simple formula around which opinion about the shape of a peaceful world can coalesce.

This may seem hopelessly optimistic. But no other theory that I have seen has anything like the clarity, coherence and power of this theory. ...

In Part II, the author addresses two questions:

1. What would the acceptance of this framework for justice imply for the justice of social arrangements within a nation?
2. What devices might be used to extend the acceptance of such a system of justice once the preponderance of nations had accepted it? 
...  Read the whole article
The Interaction of Moral and Economic Approaches to Ecological Protection
When human actions cause ecological consequences that harm humans or other species, the propriety of those actions is a moral question. But when, either because of limited resources or because of conflicting purposes, people cannot do all that they wish to protect the environment, then environmental protection is a matter of economics as well as morality.

Harm to humans differs from harm to other species, for three reasons.

  • First, we recognize greater obligations to humans than to other species. We recognize obligations to each human individual, while our obligations to other species tend to be seen as obligations to the species as a whole.
  • Second, because of the possibility of communication with humans through language, we can have information about the adequacy of compensation to humans in a way not possible when seeking to compensate other species.
  • Third, humans are ordinarily concerned with the well-being of other species, not just because other species are required for the advancement of their selfish interests, but also because humans acknowledge an obligation to all species for their own sakes. Thus any harm to other species is a harm to humans as well, while we ordinarily do not think of other species as being harmed by harm to humans.

As beings with awareness of right and wrong, humans have potential moral obligations to all species. There are at least three types of effort to protect other species that a person can make out of his own moral convictions, while asserting at most a minimal right to impose his morality on others. For each type of effort, two levels can be identified:

1. He can adopt personal rules of conduct. He can apply these rules first to his own direct conduct, and then to others, as a condition for cooperating with them, as through trade.

2. He can engage in moral dialogue with others, seeking to persuade them to voluntarily adopt his practices of respect for other species, first with respect to their own conduct, and then as a condition for cooperating with others.

3. He can persuade his community to adopt a standard of behavior that will be required of members of the community. Anyone with a contrary opinion can join another community. In this way, for example, communities outlaw cock fights. Because there are always some costs of relocating, there will be some harm to those who disagree. Such standards are least likely to infringe on the rights of dissenting individuals when they are most local. At the second level, a person can persuade his community to require a standard of behavior of its trading partners. Such action is likely to be most persuasive when the proscribed action is directly related to a traded commodity, as when the Unites States outlawed the importation of tuna caught with nets that killed large numbers of dolphins.

In the absence of perfect universal divine revelation, it is virtually inevitable that people will disagree about the extent of their obligations to other species. Thus, in addition to seeking a common understanding of our obligations to other species, we must seek ways to justly accommodate disagreements about these obligations. This is where theories of economic justice enter.

In addition to the efforts listed above, which a person can pursue on the basis of personal moral conviction, with almost no interference with the rights of others who do not share his moral conviction, a person can also advance a theory of justice that permits him to limit the harm to nature that others cause. In my view, the best basis for claiming a right to limit the harm that others do to nature is a classical liberal theory of justice, similar to that developed by Henry George in Progress and Poverty (1879) or by Bruce Ackerman in Social Justice in the Liberal State (1980). A classical liberal theory of justice recognizes the rights of all persons to equal shares of natural opportunities (that is, everything outside of human beings and the value created by human effort) and the right of each individual to pursue his personal conception of the good. Thus under a classical liberal theory of justice, any individual can assert a right to protect his share of the environment.

The idea that all natural opportunities belong equally to all humanity is a radical idea with profound implications for many areas of human activity, from public finance without coercive taxes to world peace to the meaning of human freedom. The management of the environment under such a liberal theory, with each person potentially having a different conception of the protection that other species deserve, provides a challenge for economic theory but not an insurmountable one.

Consider, for example, the protection of whales. If whales are not persons (which they might become if we found ourselves in moral dialogue with them), then hunting whales may be allowed but limited, either because some humans wish to exercise their rights to nature by protecting whales, or because a reduction in the number of whales impoverishes the world for this generation and for future generations. If the fraction f of the world's population wishes to protect whales, then that fraction of whales is off limits to whale hunters. For the fraction of whales that may be hunted, if hunting causes a loss to other potential hunters in this generation, then those who kill whales should be charged a fee for the economic losses that their behavior causes, with the proceeds shared equally among all potential hunters. If the level of hunting is so great as to cause the number of whales per capita that are available to the next generation of humans to fall below the number available to this generation, then the hunting fee should be the larger of the value of the loss to other potential hunters in this generation and the value of the loss of environmental quality to the next generation.

Economics Nobel Awarded for Contributions in Public Finance
... Prof. Vickrey wrote a book in the 1940s, suggesting that instead of having just an income tax, it would be sensible for a country to use a combination of an income tax, a consumption tax and a wealth tax. One of his suggestions was for a system of lifetime income averaging. Instead of paying a tax each year on that year's income, one would add this year's income to the sum of previous years' incomes, divide by the number of years to get average income, compute the tax on that amount of income, multiply by the number of years to get the total tax, and finally subtract the total of taxes paid in previous year to get the tax owed this year. Prof. Vickrey was also renown for his suggestions of public pricing schemes that more closely approximated marginal social costs. He may have been the first advocate of the practice of the airlines of seeking (paid) volunteers to wait for the next flight, instead of bumping the last persons to arrive. He was an early advocate of peak-load pricing for electricity, public transit, bridges, tunnels, and for city streets! He estimated that the social cost of an hour of driving in Manhattan at busy times (taking account of the value of the time of all the people who were slowed down by the presence of one more car on the streets) was $20,000! He did not want to charge people this much; he felt that a price of $20 to $50 per hour for driving in Manhattan would probably have brought the amount of driving down to where the benefit matched the cost. Prof. Vickrey was most famous in recent years for a 1961 paper that went virtually unnoticed for the first dozen or so years after it was published, but then came to be seen as the foundation of the theory of efficient auctions. In this paper, Prof. Vickrey introduced the idea of an auction in which each person makes just one bid, the item is sold to the person who makes the highest bid, but that person is only required to pay the second-highest bid. The characteristic of such an auction that has fascinated economists is that, with such a rule, it is in the interest of every bidder to bid exactly what the item is worth to him or her.

In choosing to honor Professors Mirrlees and Vickrey, the Nobel committee has highlighted the contribution that economics can make to the creation of a more productive public sector.

he Interaction of Moral and Economic Approaches to Ecological Protection

The Ethics of Coercion in Public Finance

What is Justice?
Justifications of Coercion in Economics
Cost-Benefit Analysis
Social Welfare Functions
The Pareto Criterion
Public Choice
Competing Local Governments
A Just Framework for Taxation
Intergenerational equity

Taxation began as extortion by conquerors. Over the centuries, regimes that started as tyrannies have evolved into democracies. The public sector has evolved from an apparatus for implementing the will of despots into a mechanism for carrying out democratic decisions. But public finance continues to rely on the power of tax collectors, developed under early tyrants, to coerce citizen to pay taxes. The wrath that citizens feel toward tax collectors is probably the strongest antagonistic feeling that citizens have toward a governmental institution. Nevertheless, few economists question the need for continued reliance on coercion to collect public revenues in democracies.

How do we justify coercion? Legislators and bureaucrats who devise coercive tax collection rarely bother to address the question. Nor do interest groups that promote expansions of the public sector, with their inevitable accompaniment of higher coercively collected taxes. Thus coercive tax collection has every appearance of a power play against the weak by those who have the strength to get away with it.

We need to reexamine our acceptance of coercion in public finance. If we are going to continue to rely on coercion, we need to develop a consensus about the framework that justifies it.

This paper begins with a definition of justice and a taxonomy of theories that might be used to justify coercion in public finance. I argue that theories based on Conservatism, Contractarianism, Utilitarianism, or Libertarianism all have value in some circumstances, but not for justifying the use of power to extract resources from people. None of these theories are consistent with what we ought to understand justice to be, because they do not accept the equal standing of all persons in defining what is good. A theory of justice that does accept the equal standing of all persons in defining what is good is Liberalism as elucidated by Bruce Ackerman (1980).

To oblige people to pay taxes while satisfying the limitations that Liberalism sets on the use of power, three conditions must be met:

1. People must be free to emigrate to any jurisdiction that will accept them.
2. If the fraction of natural opportunities claimed by a jurisdiction exceeds the fraction of population in the jurisdiction, the jurisdiction must compensate those who would otherwise be accorded smaller-than-average shares of natural opportunities.
3. Sub-units of jurisdictions must be allowed to secede, provided that they are willing to pay appropriate costs.

What is Justice?
Begin with what justice is not. Justice is the antithesis of might-makes-right. A powerful person might say, "This is just because I say it is just, and if you voice any disagreement I will silence you," and he might have the power to make his threat stick. However, he would be misusing language.

Justice entails the recognition by those who have power that the use of power ought to be constrained by principles whose relevance does not depend on the views of those with power. ...  Read the whole article

Farm Land Rent and the Renewal of Rural Society: The Self-Financing Model
there is a way of raising revenue for local public services that does not have these disadvantages. That way is to use a combination of fees for services and public collection of the rent of land.

The rent of land is the amount of money that would be bid for the use of land in an auction. It can be thought of as 100 rubles more than the second-highest bid, that is, the amount of money that the person for whom the use of land is most valuable must bid to outbid the person who places the second-highest value on it.

What land is worth to a person who wants to use it depends on the length of time for which he will be allowed to use it. For the purpose of defining rent, this length of time should be indefinitely long, but with provision for revising the rent as market conditions change. In other words, if similar land rents for 20% more three years from now, then the person who secures the use of a site this year would be required to pay that additional 20% at that time.

The rent of land also depends on the condition of the land. The rent of land is what people would bid for unimproved land. In a town, unimproved land is land without any structures on it. In an agricultural area, many things other than structures can count as improvements--drainage, stone removal, fertilization, leveling, etc. It might be hard to find agricultural land that had no such improvements. Thus in agricultural areas, one must subtract something from observed payments for the use of land, to account for the value that is being paid for such improvements.

The comments above describe how one might observe the rental value of land. Economics can also say something about how a bidder would decide how much to bid. A bidder would decide how he could use the land most profitably, compute the net revenue from the most profitable use after all costs including the cost of his own entrepreneurial effort and a premium for the risk to his finances, and what was left would be the total rent of the land for the period of the investment. The bidder would then estimate future rent, subtract that from the total rent, and what was left would be rent for the current period. Read the whole article

Improving Efficiency and Preventing Exploitation in Taxing and Spending Decisions
Fundamental tax reform is on the agenda these days. There are a variety of proposals for a flatter federal income tax. There are proposals to replace the federal income tax with a national sales tax. I would like to suggest that discussion of fundamental tax reform should be preceded by a discussion of what constitutes a good system of taxing and spending. When principles of good taxing and spending have been examined, what emerges as attractive is greater reliance on local decision-making and, for federal revenue, an allocation of financial obligation to states rather than direct federal taxation of individuals or corporations. ...

On the basis of the arguments given, I reject conservatism, majoritarianism, egalitarianism, contractarianism, and elitism as justifications for coercive taxing and spending. A framework for just social arrangements that does make sense to me is classical liberalism, which asserts that it is just to coerce people to accord others the maximum individual liberty that all can have. This means that people have rights to their bodies, their talents, the products of their labor, and the returns to their savings. Anything produced by human effort belong to the producer, or to the producer's successor in title through gift and exchange.

The principle of maximum individual liberty does not address the question of how the rights to natural opportunities (land, water, ocean fish, minerals, the frequency spectrum, etc.) should be assigned. There are at least three approaches within the classical liberal tradition as to how these returns should be divided.  ...

The third position, which might be called "geoliberalism" emerges from the work of Henry George. This is the position that all persons have equal rights to natural opportunities, which rights should be secured by having the public treasury collect the rental value of exclusive access to land and other natural opportunities, with the revenue used for public purposes and guaranteed incomes.

Of these three approaches, I find geoliberalism most attractive. It fits my sense of justice that all persons should have equal rights to natural opportunities. In addition, by providing funding for guaranteed incomes, geoliberalism offers a greater prospect for removing more of the distorting taxes that finance the welfare state. ...

In collecting the rental value of land, governments will collect enough to pay for any worthwhile local public goods that they provide.

Under the conservative or homesteading libertarian versions of classical liberalism, the possessor of land might say, "This is my land. I didn't ask for these public goods. You have no right to tax me to pay for them." Under geoliberalism, on the other hand, the community can reply, "You have as much right to the use of land and other natural opportunities as anyone else. If you want to exercise your rights in this community, these are the taxes you must pay. If you don't like it, claim your share of natural opportunities somewhere else."

If people are perfectly mobile and have an unlimited range of communities to choose among, then they cannot be exploited and need not tolerate inefficiency. They will move. Competing communities will find that the utility-maximizing public sector equilibrium involves providing all local public goods with benefits greater than costs, financing them by a combination of fees equal to marginal costs and taxes on the land that benefits from differential access to the local public goods. There will be no taxes on labor or capital except to internalize externalities. ...

Of course, we are very far from public acceptance of geoliberal principles. So the question arises of what might be done within current political understandings to reduce inefficiency and exploitation in taxing and spending. It is hard to know how much more than what is being done might be done. Let me be on the imaginative side.

There is a proposal that tax increases be allowed only with a two-thirds majority of both houses of Congress. That has some merit, but it carries a risk of excessive deficits. It also allows the existing level of taxation to go unquestioned. It would probably be better to have a rule that every spending proposal must be approved by a two-thirds majority of both houses of Congress to be enacted. Maybe three-fourths. If spending is truly worthwhile, then, as Wicksell said, there is a way of financing it that will secure the approval of nearly everyone. ...

The current trend toward returning functions to the states is a step in the right direction. But it encounters understandable objections that poor states cannot afford to do what they ought to do. Some form of revenue sharing is needed. But it is important to have the right definition of which states are rich and which are poor. The level of well-being in a state is determined in part by the wisdom of its public policies. States should not be penalized for adopting productive policies. Revenue sharing should equalize per capita levels of natural opportunities (mineral revenues, fishing rights, pre-development land rents, etc.) Replacing the personal and corporate income taxes with either a flat income tax or a national sales or value added tax would greatly reduce the excess burden of federal taxes. (Excess burden is roughly proportional to the square of the typical marginal tax rate.) But almost all the gains go to the rich. Perhaps the flat tax could be combined with a guaranteed income.

Even better than a flat tax or a national sales tax, in my view, would be a return to the revenue system that was apparently envisioned by the drafters of the Constitution in 1787. I mean a rule that the federal revenue requirement would be allocated to the states in proportion to their populations. The use of population as the allocation device seems anachronistic in this era of concern for impoverished regions. But the allocation could be corrected by an expenditure that equalized per capita access to natural opportunities.

I see three important virtues in allocating the revenue obligation to the states.

First, it gets rid of the IRS and its intrusions. (A national sales or value added tax would do most of this, leaving only firms subject to the tax man's scrutiny.)
Second, it requires the states to compete in seeking ways of raising revenue that do not reduce the productivity of their economies. The competitive equilibrium is to raise as much revenue as possible from charges for exclusive use of land and other natural opportunities, and to tax labor and capital only as a last resort.
The third virtue is the likelihood that placing the revenue obligation on states rather than on individuals would lead to more careful scrutiny of the value of proposed expenditures.

With only fifty states and each state aware of exactly how much each spending proposal will cost its treasury, I believe that it would be much harder to secure approval for inefficient or special-interest spending..  Read the whole article

Land Taxation and Efficient Land Speculation

I. Introduction
II. The Private and Social Returns from Land Speculation
III. Effects of Land Taxes on Speculation
A. Taxes on the Rental Value of Land
B. Taxes on the Sale Value of Land
C. Taxes on Realized Income from Land
D. Taxes on Realized Gains from the Sale of Land
IV. Indirect Effects of Taxing Land
V. Summary

The optimal timing of development is an important allocative function that can be either enhanced or degraded by the impact of land taxes on land speculation. This paper discusses four types of taxes on land:

  • taxes on the rental value of land,
  • taxes on the sale value of land,
  • taxes on realized income from land, and
  • taxes on realized gains from the sale of land.
All four taxes reduce incentives for speculation in land, which is generally beneficial. The third and fourth produce distortions with respect to incentives to develop land, while the first and second do not. All four taxes have some beneficial effect of mitigating imperfections in capital markets. All permit reduction or elimination of taxes with significant dead-weight losses, such as those on improvements. ...  Read the whole article

The Political Economy of Moral Evolution
The Nature of Moral Truth and Moral Knowledge
The Problem of Judging One's Own Cause
Ackerman's Liberalism
Secession as the Resolution of Moral Disagreement
This paper argues that a liberal theory of the resolution of disagreements about the requirements of justice must include the possibility of secession. When such a possibility is allowed, it can be predicted that there will be changes not only in the character of disputes about the requirements of justice, but also in the patterns of taxes and public expenditures. There will be a greater propensity for seeing the other side's point of view in disputes about the requirements of justice, and a greater tendency to support public activities by efficient taxes on the beneficiaries of public expenditures.

The paper begins with a discussion of the nature of moral truth, its relation to scientific truth, and the way in which moral knowledge grows. Next discussed is the difficulty of translating moral knowledge into social institutions, arising from the inevitability and impropriety of judging one's own cause. Ackerman's "neutral dialogue" is endorsed as the most acceptable way of dealing with this difficulty. But I suggest that in dialogues regarding the requirements of justice there should be an understanding that one possible outcome of the dialogue is failure to agree on mutually acceptable conditions for being part of the same society, leading to a parting of the ways. The conditions under which such a parting would occur constitute the most fundamental question of justice. I suggest that Ackerman's proposed condition of equal sharing of the providence of nature (Ackerman's initial manna) among all generations constitutes an appropriate basis for parting if agreement should be impossible.

I argue that such an understanding of the possibility of secession would provide a better framework for the growth of moral knowledge than when the politically successful are able to preclude experiments with alternative conceptions of justice. It would also reduce opportunities for the politically adroit to exploit the less adroit. If competition among societies for citizens resulted from the possibility of secession, the competitive equilibrium would include land value taxation.   ...  Read the whole article

The Structure of an Inquiry into the Attractiveness of A Social Order Inspired by the Ideas of Henry George
 I. Ethical Principles
A. People own themselves and therefore own what they produce.
B. People have obligations to share equally the opportunities that are provided by nature.
C. People are free to interact with other competent adults on whatever terms are mutually agreed.
D. People have obligations to pay the costs that their intrusive behaviors impose on others.
II. Ethical Questions
A. What is the relationship between justice (as embodied in the ethical principles) and community (or peace or harmony)?
B. How are the weak to be provided for?
C. How should natural opportunities be shared?
D. Who should be included in the group among whom rent should be shared equally?
E. Is there an obligation to compensate those whose presently recognized titles to land and other exclusive natural opportunities will lose value when rent is shared equally?
F. Can a person who is occupying a per capita share of land reasonably ask to be left undisturbed indefinitely on that land?
G. What is the moral status of "intellectual property?"
H. What standards of environmental respect can people reasonably require of others?
I. What forms of land use control are consistent with the philosophy of Henry George?
III. Efficiency Questions
A. Would public collection of the rent of land provide enough revenue for an appropriate public sector?
B. How much revenue could public collection of rent raise?
C. Is it possible to assess land with sufficient accuracy?
D. How much growth can a community expect if it shifts taxes from improvements to land?
E. To what extent does the benefit that one community receives from shifting taxes from buildings to land come at the expense of other communities?
F. What is the impact of land taxes on land speculation?
G. How, if at all, does the impact of shifting the source of public revenue to land change if it is a whole nation rather than just a community that makes the shift?
H. Is there a danger that the application of Henry George's ideas would lead to a world of over-development?
I. How would natural resources be managed appropriately if they were regarded as the common heritage of humanity?    Read the whole article

Coercion Decision Tree

Recommendations for a Society in Transition
Tideman was among a group of Georgists who provided recommendations to the former Soviet Union for how they might best move to a market economy.  Here are some of the articles related to that opportunity:

Using Tax Policy to Promote Urban Growth

Urban growth is desired because it raises peoples' incomes. In a market economy, incomes can be divided into components derived from four factors of production:

  • the rent of land,
  • the wages of labor,
  • the interest received from owning capital, and
  • the profits of entrepreneurship (the activity of choosing investments and organizing production).

Thus a successful urban growth strategy in a market economy must either increase the amounts of land, labor, capital and entrepreneurship that are used in a city or increase the payments that are made per unit of each factor, or both.

The land that a city has is fixed (or if it changes, it does so at the expense of other administrative units). Therefore, with respect to land, socially productive urban growth means adopting policies that raise the productivity of land. Labor, on the other hand, is reasonably mobile, and capital is highly mobile. Entrepreneurship springs up and fades away with the rise and fall of opportunities. Therefore, in a market economy, the payments that must be made to attract these factors are substantially outside the control of a city. Thus the growth of a city with respect to labor, capital and entrepreneurship is achieved primarily by making the city a place that attracts more of these factors, taking the rates of wages, interest and profits that must be paid to attract them as given by market forces.

Tax policy is critical for urban growth because taxes on the earnings of labor, capital and entrepreneurship drive these factors away. A city that desires to grow should refrain from taxing wages, interest or profits and concentrate its taxes on land, which does not have the option of moving away.

Certain other sources of public revenue, in addition to the rent of land, have the characteristic of not discouraging growth. These sources of revenue involve either charging people for using scarce opportunities that no one created, as with land, or charging people for the costs that their actions impose on others.

A city that wishes to grow should confine its search for revenue to these sources. In this way it will attract more labor, capital and entrepreneurship, thereby raising the rent of land, which can be collected publicly without discouraging growth.

Additions to the stock of capital are extremely important for urban growth, because of the impact of abundant capital on wages and rents. When capital is abundant, labor and land are more productive, and the more productive they are, the higher wages and rents are. ...

... Every activity that is continued should pass a test of providing adequate value for money. Most of the worthwhile activities of local governments raise the rental value of the land in the vicinity of the activity by enough to pay a substantial fraction if not all of the costs of the activity.

Thus the rental value of land is a natural first source of financing for local public expenditures.

Making the rental value of land a principal source of local public revenue has both an equity rationale and an efficiency rationale. The equity argument for social collection of the rent of land is founded on a recognition that the rental value of land has three sources.

  • Part of the rental value of land is the gift of nature--the fertility of soil, the value of good rivers and harbors, the depletable value of minerals, and so on. This part of the rental value of land should be collected publicly because no individual has a just claim to more than a proportionate share of it. Public collection is just either if it is followed by an equal distribution to all citizens or by spending on activities that provide equal benefits to all.
  • A second part of the rental value of land comes from the provision of public services. The local agencies that provide these services can justly claim the increase in the rental value of land that results from their activities.
  • A third part of the rental value of any particular site arises from private activities that are conducted in the vicinity of that site. Social collection of this part of the rental value of land is particularly appropriate if this money is used to reward those private activities according to how much they increase the rental value of land.

The efficiency argument for social collection of the rent of land has two parts.

  • First, the rental value of land has the rare quality of being a source of public revenue that does not discourage productive activity. If people are taxed according to their labor earnings, they can be expected to work less, and to tend to move from the places that tax them. If people are taxed on their investments and savings, they can be expected to save and invest less, and to find it attractive to put their savings and investments in other places where they will not be taxed as much. But when the rental value of land is collected, no one will reduce the amount of land in existence, and no one will move his land elsewhere. Thus social collection of the rent of land does not reduce the productivity of an economy in the way that most other sources of public revenue do.
  • The second part of the efficiency argument is that social collection of the rent of land tends to make land more available to those who want to start new enterprises. When the rent of land is not collected publicly, those who have rights to land will tend to ignore the possibility of releasing it to someone who might make better use of it. On the other hand, if those who have rights to land are required to make annual payments equal to the market value of the rights they hold, then these continuing payments will induce people to ask themselves regularly whether they ought to release the land to someone who can make better use of it.

To achieve the potential efficiency of public revenue from land, it is important that people not be charged more for the use of land, just because they happen to be using it particularly productively. The rental value of land should be reassessed regularly, the values that are determined should vary smoothly with location, and they should be available for public inspection so that all users of land can see that they are being charged amounts commensurate with what their neighbors are being charged.

Social collection of the rent of land also facilitates the privatization of land. If every user of land is charged annually according to the rental value of the land that he or she holds, then it is possible to undertake a just privatization of land simply by passing out titles to the current users of land.

No one will be disadvantaged by not receiving land. Future generations will not be deprived by not having been awarded shares. And the community will have a continuing income from the rent of land.

The efficiency that is entailed in using the rent of land to finance public activities applies to certain other sources of public revenue as well:

1. Charges on any publicly granted privileges, such as the exclusive right to use a portion of the frequency spectrum for radio and TV broadcasts.

2. Payments for extractions of natural resources. Such payments should be set at levels that yield the greatest possible revenue of the resources, in present value terms.

3. Taxes on pollution. Every individual or enterprise that pollutes the air, water or ground should be required to pay the estimated cost of the pollution it generates. The effect of pollution on the rental value of surrounding land is one possible measure of its cost.

4. Taxes on any other activities that reduce the rental value of surrounding land.

5. Taxes on activities such as driving or parking in crowded streets, where one person's activities reduce opportunities for others. The administration of such charges may be so expensive that it is not worth implementing them, but if the administration can be handled sufficiently cheaply, these charges are efficient to the extent that they only charge people for costs imposed on others.

6. Taxes on activities, such as the consumption of alcohol, which impose costs on others (e.g., higher traffic fatalities).

7. Charges for local public services, such as water, electricity, sewer connections, etc. It is not generally desirable to make every service completely self-financing. Rather, what is desirable is that each user be required to pay the marginal cost of the service he receives. Extensions of service networks are efficient when they increase publicly collected land rents by enough to cover the costs not covered by user charges.

8. A self-assessed tax on permanent improvements to land, at a very low rate (perhaps 1/10 of 1% per year). With a self-assessed tax, each possessor of land names a price at which he would be willing to part with the land he possesses (and any immovable improvements). He pays a tax proportional to the value he names, and anyone who wishes to may take over possession at that price. The value of such a tax is that it makes it much easier to assemble land for redevelopment, and to identify appropriate compensation when land is taken for public purposes.

All of the above taxes are positively beneficial and should be collected even if the revenue is not needed for public purposes. Any excess can be returned to the population on an equal per capita basis. If these attractive sources of revenue do not suffice to finance necessary public expenditures, then the least damaging additional tax would probably be a "poll tax," a uniform charge on all residents. If some residents are regarded to be incapable of paying such a tax, then the next most efficient tax is a proportional tax on income up to some specified amount. Then there is no disincentive effect for all persons who reach the tax limit. The next most efficient tax is a proportional tax on all income.

It is important not to tax the profits of corporations. Capital moves from where it is taxed to where it is not, until the same rate of return is earned everywhere. If the city refrains from taxing corporations they will invest more in St. Petersburg. Wages will be higher, and the rent of land, collected by the government, will be higher. The least damaging tax on corporations is one that provides a complete write-off of investments, with a carry-over of tax credits to future years. Such a tax has the effect of making the government a partner in all new investments. With such a tax the government provides, through tax credits, the same share of costs that it later receives in revenues. However, the tax does diminish the incentive for entrepreneurial activity, and it raises no revenue when investment is expanding rapidly. Furthermore, the efficiency of such a tax requires that everyone believe that the tax rate will never change. Thus it is best not to tax the profits of corporations at all. If the people of St. Petersburg want to share in the profits of corporations, then they should invest directly in the corporations, either privately or publicly. The residents of St. Petersburg would be best served by refraining from taxing the profits of corporations. Creating a place where profits are not taxed can be expected to attract so much capital that the resulting rises in wages and in government-collected rents will more than offset what might have been collected by taxing profits.

The taxes that promote urban growth have at least one of two features.

  • The first feature that a growth-promoting tax can have is that it can serve to allocate a naturally occurring resource among competing potential users. Charges for the use of land, for the use of the frequency spectrum and for depleting natural resources share this feature.
  • The second feature that a growth-promoting tax can have is that of being a charge for the costs imposed on the city by the person who pays the tax. This feature is shared by taxes on pollution, taxes on other activities that reduce the value of surrounding land, taxes on imposing congestion and other costs on other residents of the city, charges for the marginal cost of publicly provided services, and a self-assessed tax on property, reflecting the hindrance to future growth represented by existing development.
A city that confines itself to these taxes can expect to attract capital rapidly, and therefore to experience rapid growth, raising the wages of its citizens and the publicly-collected rent of its land.
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Market-Based Systems for Assigning Rental Value to Land

I. Introduction
II. Renting Land One Year at a Time
III. Defining "The Rent of Land"
IV. Consequences of Foreseeable Increases in Rental Value
V. Relaxing the Assumption of Identical Sites
VI. Summary of the System Involving Actual Delivery of Land
VII. A System Based on Options to Use Land
VIII. Mathematical Analysis of a Bidder's Calculations
IX. Relaxing the Assumption of Uniform Rent in the Options System
X. Operating the System Involving Options to Use Land
XI. Using Land Rent Information to Manage Externalities
XII. Extensions to Other State-Allocated Privileges
XIII. Precedents in Existing Institutions

Private Possession as an Alternative to Rental and Private Ownership for Agricultural Land
I. The Concept of Private Possession of Land
II. The Rental Value of Land in an Unimproved Condition
III. The Question of Tax Abatements
IV. Freedom to Transfer Titles of Possession
V. Market Determination of the Sizes of Farms
VI. The Absence of a Termination Date
VII. The Importance of Implementing Other Agricultural Reforms
VIII. Summary
One of the reasons that the debate is so fierce between the advocates of rental and the advocates of private ownership of agricultural land is that each position has important strengths as well as important weaknesses. This paper argues that there is a third possibility between rental and private ownership that retains the strengths of both while avoiding the weaknesses of both. The third possibility is private possession of land.



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