Money used to buy land from another person or corporation does not create
demand for a product of which more can be produced. From the point of view
of the economy, you might as well bury that money.
The alternative? Lower
the price of land and make it affordable to those who will put it to use.
How do we lower it? If we wanted to benefit the FIRE sector (Finance, Insurance,
Real Estate), we could do that by increasing the interest rate — but
the individual and the corporation would still have taxes to pay. The right
way is to increase the tax on land value, collecting for the commons that
which now sits in landholders' pockets even though it is not of their making:
the annual economic value of the land they occupy.
Georgists don't see economic life as a zero-sum gain. We see huge opportunities
to grow the economic pie through logical and just incentives.
H.G. Brown: Significant
Paragraphs from Henry George's Progress & Poverty:
10. Effect of Remedy Upon Wealth Production (in the unabridged P&P: Part
IX — Effects of the Remedy: Chapter 1 — Of the effect upon the
production of wealth)
The elder Mirabeau, we are told, ranked the proposition of Quesnay, to substitute
one single tax on rent (the impôt unique) for all other taxes,
as a discovery equal in utility to the invention of writing or the substitution
of the use of money for barter.
To whosoever will think over the matter, this saying will appear an evidence
of penetration rather than of extravagance. The advantages which would be gained
by substituting for the numerous taxes by which the public revenues are now
raised, a single tax levied upon the value of land, will appear more and more
important the more they are considered.
- This is the secret which would transform the little village into the great
- With all the burdens removed which now oppress industry and hamper exchange,
the production of wealth would go on with a rapidity now undreamed of.
- This, in its turn, would lead to an increase in the value of land — a
new surplus which society might take for general purposes.
- And released from the difficulties which attend the collection of revenue
in a way that begets corruption and renders legislation the tool of special
interests, society could assume functions which the increasing complexity
of life makes it desirable to assume, but which the prospect of political
demoralization under the present system now leads thoughtful men to shrink
*At the beginning of Book
IX of the complete Progress & Poverty, Henry George quotes from
Themistocles: "I cannot play upon any stringed instrument, but I
can tell you how of a little village to make a great and glorious city."
Consider the effect upon the production of wealth.
To abolish the taxation which, acting and reacting, now hampers every wheel
of exchange and presses upon every form of industry, would be like removing
an immense weight from a powerful spring. Imbued with fresh energy, production
would start into new life, and trade would receive a stimulus which would be
felt to the remotest arteries. The present method of taxation operates upon
exchange like artificial deserts and mountains;
- it costs more to get goods through a custom house than it does to carry
them around the world.
- It operates upon energy, and industry, and skill, and thrift, like a
fine upon those qualities.
- If I have worked harder and built myself a good house while you have
been contented to live in a hovel, the taxgatherer now comes annually to
me pay a penalty for my energy and industry, by taxing me more than
- If I have saved while you wasted, I am mulct, while you are exempt.
- If a man build a ship we make him pay for his temerity, as though he
had done an injury to the state;
- if a railroad be opened, down comes the tax collector upon it, as though
it were a public nuisance;
- if a manufactory be erected we levy upon it an annual sum which would
go far toward making a handsome profit.
- We say we want capital, but if any one accumulate it, or bring it among
us, we charge him for it as though we were giving him a privilege.
- We punish with a tax the man who covers barren fields with ripening
- we fine him who puts up machinery, and him who drains a swamp.
How heavily these taxes burden production only those realize who have attempted
to follow our system of taxation through its ramifications, for, as I have
before said, the heaviest part of taxation is that which falls in increased
To abolish these taxes would be to lift the whole enormous weight of taxation
from productive industry. The needle of the seamstress and the great manufactory;
the cart horse and the locomotive; the fishing boat and the steamship;
the farmer's plow and the merchant's stock, would be alike untaxed. All would
free to make or to save, to buy or to sell, unfined by taxes, unannoyed
by the taxgatherer. Instead of saying to the producer, as it does now, "The
more you add to the general wealth the more shall you be taxed!" the state
would say to the producer, "Be as industrious, as thrifty, as enterprising
as you choose, you shall have your full reward! You shall not be fined
for making two blades of grass grow where one grew before; you shall not
for adding to the aggregate wealth."
And will not the community gain by thus refusing to kill the goose that lays
the golden eggs; by thus refraining from muzzling the ox that treadeth out
the corn; by thus leaving to industry, and thrift, and skill, their natural
reward, full and unimpaired? For there is to the community also a natural reward.
The law of society is, each for all, as well as all for each. No one can keep
to himself the good he may do, any more than he can keep the bad. Every productive
enterprise, besides its return to those who undertake it, yields collateral
advantages to others. If a man plant a fruit tree, his gain is that he gathers
the fruit in its time and season. But in addition to his gain, there is a gain
to the whole community. Others than the owner are benefited by the increased
supply of fruit; the birds which it shelters fly far and wide; the rain which
it helps to attract falls not alone on his field; and, even to the eye which
rests upon it from a distance, it brings a sense of beauty. And so with everything
else. The building of a house, a factory, a ship, or a railroad, benefits others
besides those who get the direct profits.
Well may the community leave to the individual producer all that prompts him
to exertion; well may it let the laborer have the full reward of his labor,
and the capitalist the full return of his capital. For the more that labor
and capital produce, the greater grows the common wealth in which all may share.
And in the value or rent of land is this general gain expressed in a definite
and concrete form. Here is a fund which the state may take while leaving to
labor and capital their full reward. With increased activity of production
this would commensurately increase.
And to shift the burden of taxation from production and exchange to the value
or rent of land would not merely be to give new stimulus to the production
of wealth; it would be to open new opportunities. For under this system no
one would care to hold land unless to use it, and land now withheld from use
would everywhere be thrown open to improvement. ... read the whole chapter
H.G. Brown: Significant
Paragraphs from Henry George's Progress & Poverty:
12. Effect of Remedy Upon Various Economic Classes (in the unabridged P&P: Part
IX: Effects of the Remedy — Chapter 3. Of the effect upon individuals
When it is first proposed to put all taxes upon the value of land, all landholders
are likely to take the alarm, and there will not be wanting appeals to
the fears of small farm and homestead owners, who will be told that this
is a proposition
to rob them of their hard-earned property. But a moment's reflection will
show that this proposition should commend itself to all whose interests as
do not largely exceed their interests as laborers or capitalists, or both.
And further consideration will show that though the large landholders may
lose relatively, yet even in their case there will be an absolute gain. For,
increase in production will be so great that labor and capital will gain
very much more than will be lost to private landownership, while in these
and in the greater ones involved in a more healthy social condition, the
whole community, including the landowners themselves, will share.
- It is manifest, of course, that the change I propose will greatly benefit
all those who live by wages, whether of hand or of head -- laborers,
operatives, mechanics, clerks, professional men of all sorts.
- It is manifest, also, that it will benefit all those who live partly
by wages and partly by the earnings of their capital -- storekeepers, merchants,
manufacturers, employing or undertaking producers and exchangers of
from the peddler or drayman to the railroad or steamship owner -- and
- it is likewise manifest that it will increase the incomes of those whose
incomes are drawn from the earnings of capital. ...
... In short, the working farmer is both a laborer and a capitalist, as well
as a landowner, and it is by his labor and capital that his living is made.
loss would be nominal; his gain would be real and great. In varying degrees
is this true of all landholders. Many landholders are laborers of one sort
or another. This measure would make no one poorer but such as could be made
a great deal poorer without being really hurt. It would cut down great fortunes,
but it would impoverish no one.
Wealth would not only be enormously increased; it would be equally distributed.
I do not mean that each individual would get the same amount of wealth. That
would not be equal distribution, so long as different individuals have different
powers and different desires. But I mean that wealth would be distributed in
accordance with the degree in which the industry, skill, knowledge, or prudence
of each contributed to the common stock. The great cause which concentrates
wealth in the hands of those who do not produce, and takes it from the hands
of those who do, would be gone. The inequalities that continued to exist would
be those of nature, not the artificial inequalities produced by the denial
of natural law. The nonproducer would no longer roll in luxury while the producer
got but the barest necessities of animal existence. ... read
the whole chapter
Jeff Smith: What the
Left Must Do: Share the Surplus
Martin Luther King, Jr: Where
Do We Go From Here? (1967)
As taxing land spurs
employment, taxing labor and capital does just the opposite.
Taxing salaries makes it more expensive to hire people. Taxing earned
profits makes it more expensive to invest in firms that hire people. If you want jobs, don’t tax them. Demanding
jobs while taxing wages is irrational. When we tax (or in other ways
reduce) one’s efforts, most people naturally produce less. Less
output not only shrinks private assets but also the formation of public
Unlike taxing earned incomes,
shrinks the pie, collecting rent grows the pie. While taxes on
effort lessen the motivation to produce, charging people rent for
what’s already been provided, by definition, does not diminish the
motive to produce. Instead, recovering rent removes the private profit
from speculating in land and
resources. And once we redirect revenue from sweetheart deals (e.g.,
Pentagon contracts), tax breaks (e.g., depletion allowances), and
subsidies (e.g., agri-business
support) into a general dividend, then why bother currying favours from
the state? Finding rent-seeking from both nature and the legislature
less profitable, investors would turn to improving production: new
technology and worker re-training, providing society more from
less. Read the whole article
I am now convinced that the simplest approach will prove to be
the most effective — the solution to poverty is to abolish it directly
by a now widely discussed measure: the guaranteed income.
Earlier in this century this proposal would have been greeted with ridicule
and denunciation as destructive of initiative and responsibility. At that
time economic status was considered the measure of the individual's abilities
and talents. In the simplistic thinking of that day the absence of worldly
goods indicated a want of industrious habits and moral fiber.
We have come a long way in our understanding of human motivation and of
the blind operation of our economic system. Now we realize that dislocations
in the market operation of our economy and the prevalence of discrimination
thrust people into idleness and bind them in constant or frequent unemployment
against their will. The poor are less often dismissed from our conscience
today by being branded as inferior and incompetent. We also know that no
matter how dynamically the economy develops and expands it does not eliminate
We have come to the point where we must make the nonproducer a consumer
or we will find ourselves drowning in a sea of consumer goods. We have
so energetically mastered production that we now must give attention to
distribution. Though there have been increases in purchasing power, they
have lagged behind increases in production. Those at the lowest economic
level, the poor white and Negro, the aged and chronically ill, are traditionally
unorganized and therefore have little ability to force the necessary growth
in their income. They stagnate or become even poorer in relation to the
The problem indicates that our emphasis must be two-fold. We must create
full employment or we must create incomes. People must be made consumers
by one method or the other. Once they are placed in this position, we need
to be concerned that the potential of the individual is not wasted. New
forms of work that enhance the social good will have to be devised for
those for whom traditional jobs are not available.
In 1879 Henry George anticipated this state of affairs when he wrote,
in Progress and Poverty:
"The fact is that the work which improves the condition of mankind,
the work which extends knowledge and increases power and enriches literature,
and elevates thought, is not done to secure a living. It is not the work
of slaves, driven to their task either by the lash of a master or by
animal necessities. It is the work of men who perform it for their own
sake, and not that they may get more to eat or drink, or wear, or display.
In a state of society where want is abolished, work of this sort could
be enormously increased." [from Book IX: Effects of the Remedy;
Chapter 4: Of the changes that would be wrought in social organization
and social life] ... read the book
excerpt and whole speech