Georgism, Part Nine: The Morality of Tax Reform

Much of Henry George’s classic work, Progress and Poverty, is devoted to the immorality of our current tax system. Although George didn’t use the following example, I decided to try it, because it illustrates a problem I’ve observed throughout my adult life.

Let’s suppose there are two children, each starting school as a first grader this coming fall. One is from a wealthy family, although her parents never had to work a day in their lives. They were simply fortunate enough to inherit a large estate from a grandparent. The other child is from a poor family. Her parents are legal immigrants–refugees who successfully made it to the United States to start a new life. They work hard in minimum wage jobs but are struggling to make ends meet.

Here’s the question: Why is it that we as Americans–who believe that all people are created equal–are okay with that scenario? To put the matter another way, how can we state that “what you need for success in this country is to work hard and save your money,” when the reality is that the first family is far more wealthy–and more likely to live a long, happy life–without lifting a finger?

George would point to the need to eliminate sales taxes and income taxes, moving all taxation to raw property. (I would include the dollar value of inherited estates above a certain homestead value to the latter category.) In so doing, the poor family would find that it could keep more of its hard-earned money while the wealthy inheritors–who had done nothing to deserve their wealth–would pay a greater share of our nation’s tax burden.

Note carefully that George does not advocate taxing the improved portion of real property, such as buildings and fixtures. By focusing on raw land, his tax would encourage two beneficial behaviors: (1) the donation of raw land for parks, because landowners would no longer want to pay the stiff tax; and (2) the development of other idle land for residential purposes, thus addressing one aspect of our homelessness problem.

I’m old enough to realize that such ideas still require many election cycles before they take root. And I’m aware that powerful interests–especially owners of large tracts of land–could be counted on to fight back. But when these same property owners stop to think about the advantages of eliminating other forms of taxation, not to mention the many benefits of removing the shackles of payroll taxes from our economic powerhouse, I believe they might even jump on the bandwagon.