Okay. So Henry George, writing over a century ago, has convinced me that we could cure many of our social ills merely by changing our tax structure. As we have seen, he advocates replacing all other taxes with one simple tax on unimproved real property. In essence, the tax would be so large that no one would want to own real property without improving it immediately, if only to afford paying the tax on the unimproved portion of the land.
The upsides to this revolutionary approach are many, as detailed in his classic work, Progress and Poverty. These include eliminating the unfairness of our current income tax code, stopping the punishment of enterprise and hard work, and unchaining commercial activity (which is hampered by taxes on sales, inventories, and imports.) Freed from these barriers, we would expect an enormous outpouring of economic activity, the likes of which our nation has not seen since the days of westward expansion during the 19th Century. Landowners unwilling to pay the tax would deed their property back to the government–for the benefit of all of us–or would sell the property cheaply (to avoid the tax) to those willing to improve it.
Now, what are the downsides? The only negative aspects to Georgism, as I see it, would lie in (a) the temporary, but significant, disruption to federal, state, and local revenues during the implementation phase; and (b) the political difficulty in convincing landowners (and their minions) that this was not just a Communist conspiracy to nationalize property.
Traditionally, states and local governments, especially the latter, have monopolized taxes on real property, often to fund elementary and secondary school systems. Meanwhile, the federal government has relied most heavily on the income and other payroll taxes and states have been left to rely on income taxes, sales taxes, or both. Since Georgism would have the effect of banning taxes on income, sales, and improved property, the federal government would need to assure that some share of funding from the single-source tax on unimproved property would flow back to state and local governments to replace the revenues lost. Although “revenue sharing” is not a new concept (it has been practiced by the federal government at least since the Nixon era) Georgism would require an extreme dose, one bound to be criticized if the apportionment turned out to be clumsy or unfair, as it likely would. In other words, Georgism would be fighting against a kaleidoscope of federal, state, and local taxing authorities, all with their different ways of calculating the amount of tax owed by each taxable entity. There would, therefore, be powerful losers as well as winners under the new system, and these losers could be counted on to scream the loudest.
So, don’t hold your breath that any form of Georgism will be implemented in our lifetime.
Still, there’s something magical in the notion that there really might be a solution out there that could end homelessness in a single generation while building the foundations for permanent economic growth. Georgism is simple, elegant, and compelling. What a shame that our complicated layers of self-government and taxation make the solution all but impossible to implement!