George's Constructive Program
The key to renewing cities is shifting from
obstructive ways of sharing rent, like rent control; and
destructive ways, like looting and subsidies; to
constructive ways. Henry George showed us how equity and
efficiency go hand in hand, how the magic of justice
combines with the magic of incentive.
- First, by George, equity need not be in kind. The
monetary mechanism overcomes the clumsiness of in-kind
equity. If four families inherit a one-family house,
all four don't crowd in; they sell and divide the
money, or one buys out the others. There is equity in
money as well as in real estate. Money is often better;
the reinvestment opportunity puts the house on a magic
carpet to follow you anywhere. Money is wonderful!
- Second, by George, use the tax mechanism. Do not
divide land into unusable morsels, or shackle the
market with rent controls, or dissipate rent in
subsidies. Give land to the highest bidder, and tax
ground rents to support government.
Power to Destroy or to Redeem
But we've always heard that tax destroys incentives.
The news in Henry George is that we can tax all the rent
out of land, and not one square foot will walk away, nor
will God switch off the Creation. Man creates capital by
saving; some Other Force created land, and sustains and
serves it every day, undeterred by taxes.
Nor will Georgist taxes leave owners sulking on their
land, but the contrary. A 1983 Fortune magazine article calls them
"Higher Taxes that Promote Development."
The fixed tax is levied on land value, based on
opportunity cost. The owner uses land harder and improves
it more to meet a fixed tax; or sells, releasing surplus
land to those needing more space. Taxes stifle enterprise
only if they increase with enterprise. Land tax increases
only with opportunity cost, which is independent of the
enterprise of the owner. The only activity this tax
impairs is withholding land from use. ... read the whole article