Small Thought: Georgism

If you’re not familiar with Georgism, it’s the idea that taxes should be based strictly[1] on the unimproved value of land, and nothing else (i.e. no sales tax, no income tax, no generic wealth tax). The logic here is that land, unlike income and wealth, cannot be moved from country to country to seek favorable tax law, and because construction and development is generally good, and taxing improved land (i.e. property tax as it currently exists) discourages development, the only revenue tax that does not create harmful distortionary incentives is unimproved land value.

There still seems to be a serious problem here, though. Consider the Googleplex. It certainly adds massive value, and both the government and Google are in favor of it under Georgism. However, everyone around it hates this idea; if it makes their land more valuable, their taxes will go up, and unless they are willing to sell (which most people are not), they will get no benefit from this.[2] Additionally, if you try to judge value of property by recent sales nearby, you’re going to have a hell of a time devising a mechanism that won’t tell you that the unimproved value of the Googleplex land is preposterously high, even though if someone bought it and removed the Googleplex, the value of everything around would plummet.

It’s a nice idea in theory, but for something so simple, it’s really frigging hard to implement.

[1]: Pigovian taxes on things we want to discourage, like cigarettes and CO2, are usually also permitted.

[2]: Yes, I know, in theory they could take out a loan against the increased value of their property to pay their taxes and then some. Empirically, they do not. (This was a problem in my hometown, as in many other exurbs.)

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