Georgism
Georgism, in modern times also called Geoism, and known historically as the single tax movement, is an economic ideology holding that persons should own the value that they produce themselves, while the economic rent derived from land—including from all natural resources, the commons, and urban locations—should belong equally to all members of society. Developed from the writings of American economist and social reformer Henry George, the Georgist paradigm seeks solutions to social and ecological problems based on principles of land rights and public finance that attempt to integrate economic efficiency with social justice.
Georgism is concerned with the distribution of economic rent caused by land ownership, natural monopolies, pollution rights, and control of the commons, including title of ownership for natural resources and other contrived privileges. Any natural resource that is inherently limited in supply can generate economic rent, but the classical and most significant example of land monopoly involves the extraction of common ground rent from valuable urban locations. Georgists argue that taxing economic rent is efficient, fair, and equitable. The main Georgist policy recommendation is a land value tax, the revenues from which can be used to reduce or eliminate existing taxes that are posited to be unfair and inefficient. Some Georgists also advocate the return of surplus public revenue to the people by means of a basic income or citizen's dividend.
George popularized the concept of gaining public revenues mainly from land and natural resource privileges with his first book, Progress and Poverty. The philosophical basis of Georgism draws on thinkers such as John Locke, Baruch Spinoza, and Thomas Paine. Economists from Adam Smith and David Ricardo to Milton Friedman and Joseph Stiglitz have observed that a public levy on land value does not cause economic inefficiency, unlike other taxes. A land value tax also has progressive effects. Advocates of land value taxes argue that they reduce economic inequality, increase economic efficiency, remove incentives to under-utilize urban land, and reduce property speculation.
Georgist ideas were popular and influential in the late 19th and early 20th centuries. Political parties, institutions, and communities were founded on Georgist principles. Early devotees of George's economic philosophy were often termed Single Taxers for their political goal of raising public revenue mainly or only from a land-value tax, although Georgists endorsed multiple forms of rent capture as legitimate. One contemporary and friend of Henry George who advocated strongly for the Single Tax movement, and lectured at related organizations such as the Manhattan Single Tax Club, was Charles Frederic Adams. The term Georgism was invented later, and some prefer the term geoism as more generic.
Main tenets
is best known for popularizing the argument that government should be funded by a tax on land rent rather than taxes on labor. He believed that although scientific experiments could not be performed in political economy, theories could be tested by comparing different societies with different conditions and by thought experiments about the effects of various factors. Applying this method, he concluded that many societal problems, such as poverty, inequality, and economic booms and busts, can be attributed to private ownership of the necessary resource: land rent. In his most celebrated book, Progress and Poverty, George argues that the appropriation of land rent for private use contributes to persistent poverty in spite of technological progress, and causes economies to tend toward boom-and-bust cycles. According to George, people justly own what they create, but natural opportunities and land belong equally to all.George believed there is an important distinction between common and collective property. Although equal rights to land might be achieved by nationalizing land and then leasing it to private users, George preferred taxing unimproved land value and leaving the control of land mostly in private hands. His reason for leaving land in private control and slowly shifting to land value tax was that it would not penalize existing owners who had improved land and would also be less disruptive and controversial in a country where land titles have already been granted.
Georgists have observed that privately created wealth is socialized via the tax system, while socially created wealth in land values are privatized in the price of land titles and bank mortgages. The opposite would be the case if land rents replaced taxes on labor as the main source of public revenue; socially created wealth would become available for use by the community, while the fruits of labor would remain private. According to Georgists, a land value tax can be considered a user fee instead of a tax, since it is related to the market value of socially created locational advantage, the privilege to exclude others from locations. Assets consisting of commodified privilege can be considered wealth since they have exchange value, similar to taxi medallions. A land value tax, charging fees for exclusive use of land, as a means of raising public revenue is also a progressive tax tending to reduce economic inequality, since it applies entirely to ownership of valuable land, which correlates with income, and there is generally no means by which landlords can shift the tax burden onto tenants or laborers. Landlords cannot pass the tax on to tenants because the supply and demand of rented land is unchanged. Because the supply of land is perfectly inelastic, land rents depend on what tenants are prepared to pay, rather than on the expenses of landlords, and so the tax cannot be passed on to tenants.
Economic properties
Standard economic theory suggests that a land value tax would be extremely efficient—unlike other taxes, it does not reduce economic productivity. Milton Friedman called George's tax on unimproved land value the "least bad tax", since unlike other taxes, it would not impose an excess burden on economic activity ; hence, a replacement of other more "distortionary" taxes with a land value tax would improve economic welfare. Joseph Stiglitz argues that a land value tax can improve the use of land and redirect investment toward productive, non-rent-seeking activities. Because land value tax would apply to foreign land speculators, the Australian Treasury estimated that land value tax was unique in having a negative marginal excess burden, meaning that it would increase long-run living standards.Adam Smith first noted the efficiency and distributional properties of a land value tax in The Wealth of Nations
Benjamin Franklin and Winston Churchill made similar distributional and efficiency arguments for taxing land rents. They noted that the costs of taxes and the benefits of public spending always eventually apply to and enrich the owners of land. Therefore, they believed it would be best to defray public costs and recapture value of public spending by applying public charges directly to owners of land titles, rather than harming public welfare with taxes assessed against beneficial activities such as trade and labor.
Henry George wrote that his plan for a high land value tax would cause people "to contribute to the public, not in proportion to what they produce... but in proportion to the value of natural opportunities that they hold ". He went on to explain that "by taking for public use that value which attaches to land by reason of the growth and improvement of the community", it would, "make the holding of land unprofitable to the mere owner, and profitable only to the user".
A high land value tax would discourage speculators from holding valuable natural opportunities unused or only partially used. Henry George claimed this would have many benefits, including the reduction or elimination of tax burdens from poorer neighborhoods and agricultural districts; the elimination of a multiplicity of taxes and expensive obsolete government institutions; the elimination of corruption, fraud, and evasion with respect to the collection of taxes; the enablement of true free trade; the destruction of monopolies; the elevation of wages to the full value of labor; the transformation of labor-saving inventions into blessings for all; and the equitable distribution of comfort, leisure, and other advantages that are made possible by an advancing civilization. In this way, the vulnerability that market economies have to credit bubbles and property manias would be reduced.
Georgism and environmental economics
The early conservationism of the Progressive Era was inspired partly by Henry George, and his influence extended for decades afterward. Some ecological economists still support the Georgist policy of land value tax as a means of freeing or rewilding unused land and conserving nature by reducing urban sprawl.Pollution degrades the value of what Georgists consider to be commons. Because pollution is a negative contribution, a taking from the commons or a cost imposed on others, its value is economic rent, even when the polluter is not receiving an explicit income. Therefore, to the extent that society determines pollution to be harmful, most Georgists propose to limit pollution with taxation or quotas that capture the resulting rents for public use, restoration, or a citizen's dividend.
Georgism is related to the school of ecological economics, since both propose market-based restrictions for pollution. The schools are compatible in that they advocate using similar tools as part of a conservation strategy, but they emphasize different aspects. Conservation is a central issue of ecology, whereas economic rent is the central issue of geoism. Ecological economists might price pollution fines more conservatively to prevent inherently unquantifiable damage to the environment, whereas Georgists might emphasize mediation between conflicting interests and human rights. Geolibertarianism, a market-oriented branch of Geoism, tends to take a direct stance against what it perceives as burdensome regulation and would like to see auctioned pollution quotas or taxes replace most command and control regulation.
Since ecologists are primarily concerned with conservation, they tend to emphasize less the issue of equitably distributing scarcity/pollution rents, whereas Georgists insist that unearned income not accrue to those who hold title to natural assets and pollution privilege. To the extent that geoists recognize the effect of pollution or share conservationist values, they will agree with ecological economists about the need to limit pollution, but geoists will also insist that pollution rents generated from those conservation efforts do not accrue to polluters and are instead used for public purposes or to compensate those who suffer the negative effects of pollution. Ecological economists advocate similar pollution restrictions but, emphasizing conservation first, might be willing to grant private polluters the privilege to capture pollution rents. To the extent that ecological economists share the geoist view of social justice, they would advocate auctioning pollution quotas instead of giving them away for free. This distinction can be seen in the difference between basic cap and trade and the geoist variation, cap and share, a proposal to auction temporary pollution permits, with rents going to the public, instead of giving pollution privilege away for free to existing polluters or selling perpetual permits.