We’re closing in on 150 years since Henry George wrote his classical political/economic work, Progress and Poverty, yet we still haven’t recognized its genius.
Now that I’m nearing the end of that book, I can safely say that his ideas would cure many of the fiscal and economic ills that have come to plague us so often. After all, he was compelled to write the book after wondering why it is so common to see poverty “flourishing” in the midst of economic booms. In modern times, we see this in the form of homelessness on the streets of otherwise prosperous cities.
Believe it or not, George offers a convincing answer. Poverty is actually caused by prosperity because (he says) rents tend to rise in a manner that extracts all but the minimal profits and wages required for production to occur. Thus, landowners unfairly profit from the work of capitalists and labor. So, according to George, its not the evil capitalists who are stealing the workers’ wages. It’s the landowners who are stealing both the capitalists profits and the workers’ wages.
His solution is remarkably simple: abolish all forms of taxation other than a tax equal to the rental value of the unimproved part of each parcel of land. Income taxes and payroll taxes would be abolished because they punish a healthy work ethic. Sales taxes would be abolished because they impede commerce and industry. Property taxes would be abolished on property improvements, such as buildings and fixtures.
According to George, this form of taxation would force landowners to either sell their unimproved parcels of land (perhaps to the government), because the tax would be too high to keep them, or improve those parcels in a manner that would generate a profit after the payment of the tax on the underlying land. Note that this would tend to free more land for residential development.
How would we assess each parcel to determine the value of the improved versus the unimproved parts of the land? Most localities in the United States do that already. When I look at my property tax bill here in the City of Vancouver, Washington, I can see how much value the assessor placed on my raw land, an amount which is stated separately from the value of the improvements (house, fencing, and shed). George would recommend levying a tax only on the unimproved portion. The tax would be quite high, but remember that it would be replacing all income, sales, and other taxes.
Note the many benefits of such a transformation: (1) we would all be treated as equal human beings, paying taxes only to the extent that we wished to hold onto land; (2) tax evasion would be next to impossible, since everyone’s land would be out in the open, and its assessment would be public knowledge; (3) annual income tax returns would be unnecessary, since we would just pay whatever the assessor found (unless we chose to appeal the assessment, as is currently the case with property taxation); (4) employers would not need to bother with payroll taxes; (5) shopkeepers would not need to bother collecting sales taxes; (6) hard work would be rewarded. And the list goes on.
The only difficulty I can find in the system–and George himself pointed this out–is that it can be difficult for an assessor to measure the difference in value between the raw land and the improved part of the land. But George answers this difficulty as follows: which is worse, sticking with a system in which income, sales, payroll, and property are all measured in a less than accurate manner, or limiting the small inaccuracy to real property?
As of right now, I’m ready to call myself a Georgist!