There are people who suggest that since a tax on land
value today might not be sufficient to meet all
the revenue needs of government at all levels, we
shouldn't even be seriously considering land value
taxation. This strikes those who think seriously about
the matter as very shallow reasoning.
If there is a form of taxation which is
clearly superior to the alternatives, why would we
not make it our primary revenue source, even if
it alone is not sufficient to meet all our revenue
needs? (And there are many who will make the
argument — a fair one, I think — that the
implementation of this reform would have many effects
which would reduce the need for many of the social
services we currently provide to those who are victims of
our current structure. Many costs of government would go
away.)
If land value taxation is insufficient to completely
meet our revenue needs, well, let's use it anyway. If it
supplies 30% and we must find other sources for the other
70%, fine. If it supplies 50% and we must find other
sources for the other 50%, fine. If it supplies 70% and
we must find other sources for the other 30%, fine. We
should rely first on non-distorting taxes before we
supplement with distorting ones. We should rely first on
just taxes before we turn to unjust ones. We should rely
first on taxes that align our incentives in directions we
need to go (e.g., slowing, even reversing urban sprawl;
increasing urban density to facilitate more and better
public transportation; lower housing costs, etc.).
Q: I want to follow-up on what you had said some
months ago about land reform:
JES: "The main, underlying idea of Henry George is the
taxation of land and other natural resources. At the
time, people thought, "not really that too," but what was
underlying his ideas is rent associated with things that
are inelastically supplied, which are land and natural
resources. And using natural resource extraction and
using land rents as the basis of taxation is an argument
that I think makes an awful lot of sense because it is a
non-distortionary source of income and wealth.
Q: In Globalization and its Discontents, you write (p.
81): "But land reform represents a fundamental change in
the structure of society, one that those in the elite
that populates the finance ministries, those with whom
the international financial institutions interact, do not
necessarily like."
JES: Yes. Let me try to approach the question a little
more systematically. Once you take the perspective I just
gave, that means the management should be done in such a
way that it maximizes the amount of money available to
the US government from natural resources because they are
within its domain and control. So, looking at the United
States, one of the implications of this is that a
foundation such as yours [the Robert Schalkenbach
Foundation, created to promote the ideas of Henry George,
as expressed in Progress & Poverty] ought to be very
much against the policies of the US government of giving
away our natural resources. Here is a case where we not
only are not taxing it much, we're actually giving it
away.
Q: I assume you're speaking in particular of oil and
mineral rights, but would not Broadband Spectrum rights
also be included in that category?
JES: Yes, Broadband Spectrum rights as well. Now,
giving away rights such as those would be anathema to the
spirit of Henry George. And the second part is that when
you sell them, you want to do so in such a way as to
maximize the revenues. And whether you decide to sell it
or whether you decide to rent it, would be the question
of what is the way that maximizes the extraction of
public revenues.
Q: And those revenues go to the people. Not to private
concerns.
JES: Exactly. So you're trying to say, from the
perspective of public management, how can we take this
inelastic supply of public resources and maximize the
rents that we can extract from it, consistent with other
public objectives? That is a very deep philosophical
approach, and requires a re-thinking of how we manage all
aspects of those public resources. However, much of what
we do is inconsistent with that. Now, the issue of land
reform is a little bit different. There, it's a two-step
analysis. My concern that I expressed about land is that
in many developing countries, you have most land owned by
a few rich people, and the land is relatively little
taxed. But the land is worked in a system of
sharecropping in which workers have to pay the landlord
50% of their output. In a way, you can look at that 50%
as a tax. The sharecroppers are paying a 50% tax to the
landlord. But it's worse than a tax. Because it's not a
land tax, it's a tax on their labor. And it's a tax that
goes to the landlord rather than to society. So the
notion is that land reform could take a variety of
different forms. For instance, the government could take
over the land and rent it to the people. Or give it to
the people and have a land tax that would not have the
distortionary effect of land reform. So, in a way, these
systems of share-cropping are worse even than anything
that Henry George was worried about in terms of misuse of
land. ...
Q: I wanted to ask your view on the adequacy of land
as a tax base. At one time, as you know, there was a
"Single Tax" movement, for the purpose of deriving
revenues sufficient to run the government solely from
land value taxation. In your view, how feasible is that
today?
JES: Most economists would say that you cannot run the
US economy on the "Single Tax." In my mind, the "Single
Tax" is the wrong way to think about it. The question is:
"Would it be better if we had more taxation of land and
natural resource, and more revenue from natural resource
management, and I would include atmosphere and spectrum."
And less tax on income and savings. And I would say,
"Yeah." And I think many economists would agree with
that. So, if you want to sell it as a "Single Tax," then,
no, you won't get anyone to agree that there's enough
revenue there. If you look at is a more "central" tax,
then, yes, you will get most economists to agree with
you.
...
read the entire interview