Georgism

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Georgism, in modern times also called Geoism,

Georgist ideas were popular and influential during the late 19th and early 20th centuries.[17] Political parties, institutions, and communities were founded on Georgist principles during that time. 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 (e.g. seigniorage) as legitimate.^[18] The term Georgism was invented later, and some prefer the term geoism as more generic.^[19][20]

George believed there was an important distinction between common and collective property.[22] 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. George's reasoning 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 (e.g., through

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Standard economic theory suggests that a land value tax would be extremely efficient—unlike other taxes, it does not reduce economic productivity.^[16] Milton Friedman described Henry George's tax on unimproved value of land as the "least bad tax", since unlike other taxes, it would not impose an excess burden on economic activity (leading to zero or even negative "deadweight loss"); hence, a replacement of other more "distortionary" taxes with a land value tax would improve economic welfare.^[27] Joseph Stiglitz argues that value tax can improve the use of land and redirect investment toward productive, non-rent-seeking activities.^[28] 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.^[29]

It was Adam Smith who first noted the efficiency and distributional properties of a land value tax in his book The Wealth of Nations.^[12]

Ground-rents are a still more proper subject of taxation than the rent of houses. A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground. More or less can be got for it according as the competitors happen to be richer or poorer, or can afford to gratify their fancy for a particular spot of ground at a greater or smaller expense. In every country the greatest number of rich competitors is in the capital, and it is there accordingly that the highest ground-rents are always to be found. As the wealth of those competitors would in no respect be increased by a tax upon ground-rents, they would not probably be disposed to pay more for the use of the ground. Whether the tax was to be advanced by the inhabitant, or by the owner of the ground, would be of little importance. The more the inhabitant was obliged to pay for the tax, the less he would incline to pay for the ground; so that the final payment of the tax would fall altogether upon the owner of the ground-rent. Both ground-rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents and the ordinary rent of land are, therefore, perhaps, the species of revenue which can best bear to have a peculiar tax imposed upon them. ... Nothing can be more reasonable than that a fund which owes its existence to the good government of the state should be taxed peculiarly, or should contribute something more than the greater part of other funds, towards the support of that government.

— Adam Smith, The Wealth of Nations, Book V, Chapter 2

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.^[30][31]

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 [common] opportunities that they hold [monopolize]". 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 (like urban real estate) 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.^[32] In this way, the vulnerability that market economies have to credit bubbles and property manias would be reduced.^[16]

Henry George shared the goal of modern Georgists to socialize or dismantle rent from all forms of land monopoly and legal privilege. However, George emphasized mainly his preferred policy known as land value tax, which targeted a particular form of unearned income known as ground rent. George emphasized ground-rent because basic locations were more valuable than other monopolies and everybody needed locations to survive, which he contrasted with the less significant streetcar and telegraph monopolies, which George also criticized. George likened the problem to a laborer traveling home who is waylaid by a series of highway robbers along the way, each who demand a small portion of the traveler's wages, and finally at the very end of the road waits a robber who demands all that the traveler has left. George reasoned that it made little difference to challenge the series of small robbers when the final robber remained to demand all that the common laborer had left.^[37] George predicted that over time technological advancements would increase the frequency and importance of lesser monopolies, yet he expected that ground rent would remain dominant.^[38] George even predicted that ground-rents would rise faster than wages and income to capital, a prediction that modern analysis has shown to be plausible, since the supply of land is fixed.^[39]

Spatial rent is still the primary emphasis of Georgists because of its large value and the known dis-economies of misused land. However, there are other sources of rent that are theoretically analogous to ground-rent and are debated topics of Georgists. The following are some sources of economic rent.^[40][41][42]

• Extractable resources (minerals and hydrocarbons)^[43][44]
• Severables (forests and stocks of fish)^[36][45][46]
• Extraterrestrial domains (geosynchronous orbits and airway corridor use)^[41][42]
• Legal privileges that apply to specific location (taxi medallions, billboard and development permits, or the monopoly of electromagnetic frequencies)^[41][42]
• Restrictions/taxes of pollution or
  fishing quotas)^[35][41][42]
• Right-of-way (transportation) used by railroads, utilities, and internet service providers^[47][48][49]
• Issuance of legal tender (see seigniorage)^[35][50]
• Privileges that are less location dependent but that still exclude others from natural opportunities (
  patents)^[51][52]

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.^[35][57][58]

Georgism is related to the school of

Most early advocacy groups described themselves as single taxers and George reluctantly accepted the single tax as an accurate name for his main political goal—the repeal of all unjust or inefficient taxes, to be replaced with a land value tax (LVT).

Some modern proponents are dissatisfied with the name Georgist. While Henry George was well known throughout his life, he has been largely forgotten by the public and the idea of a single tax of land predates him. Some now prefer the term geoism,^[20][66] with geo (from Greek γῆ gē "earth, land") being the first compound of the name George < (Gr.) Geōrgios < geōrgos "farmer" or geōrgia "agriculture, farming" < gē + ergon "work"^[67][68] deliberately ambiguous. The terms Earth Sharing,^[69] geonomics^[70] and geolibertarianism^[71] are also used by some Georgists. These terms represent a difference of emphasis and sometimes real differences about how land rent should be spent (citizen's dividend or just replacing other taxes), but they all agree that land rent should be recovered from its private recipients.

Compulsory fines and fees related to land rents are the most common Georgist policies, but some geoists prefer voluntary value capture systems that rely on methods such as non-compulsory or self-assessed location value fees, community land trusts^[72] and purchasing land value covenants.^{[73][74][75][76][77]} Some geoists believe that partially compensating landowners is a politically expedient compromise necessary for achieving reform.^[78][79] For similar reasons, others propose capturing only future land value increases, instead of all land rent.^[80]

Some

Georgist ideas heavily influenced the politics of the early 20th century. Political parties that were formed based on Georgist ideas include the

Several communities were initiated with Georgist principles during the height of the philosophy's popularity. Two such communities that still exist are

Georgist ideas were also adopted to some degree in Australia, Hong Kong, Singapore, South Africa, South Korea, and Taiwan. In these countries, governments still levy some type of land value tax, albeit with exemptions.^[92] Many municipal governments of the United States depend on real-property tax as their main source of revenue, although such taxes are not Georgist as they generally include the value of buildings and other improvements. One exception is the town of Altoona, Pennsylvania, which for a time in the 21st century only taxed land value, phasing in the tax in 2002, relying on it entirely for tax revenue from 2011, and ending it 2017; the Financial Times noted that "Altoona is using LVT in a city where neither land nor buildings have much value".^[93][94]

In 2023,

Various organizations still exist that continue to promote the ideas of Henry George. According to The American Journal of Economics and Sociology, the periodical Land&Liberty, established in 1894, is "the longest-lived Georgist project in history".^[98] Founded during the Great Depression in 1932, the Henry George School of Social Science in New York offers courses, sponsors seminars, and publishes research in the Georgist paradigm.^[99] Also in the US, the Lincoln Institute of Land Policy was established in 1974 based on the writings of Henry George. It "seeks to improve the dialogue about urban development, the built environment, and tax policy in the United States and abroad".^[100]

The

Karl Marx considered the single-tax platform as a regression from the transition to communism and referred to Georgism as "capitalism's last ditch".^[105] Marx argued that, "The whole thing is ... simply an attempt, decked out with socialism, to save capitalist domination and indeed to establish it afresh on an even wider basis than its present one."^[106] Marx also criticized the way land value tax theory emphasizes the value of land, arguing that George's "fundamental dogma is that everything would be all right if ground rent were paid to the state."^[106]

Richard T. Ely agreed with the economic arguments for Georgism but believed that correcting the problem the way Henry George wanted, without compensation, was unjust to existing landowners. In explaining his position, Ely wrote, "If we have all made a mistake, should one party to the transaction alone bear the cost of the common blunder?"^[107]

John R. Commons supported Georgist economics but opposed what he perceived as an environmentally and politically reckless tendency for advocates to rely on a one-size-fits-all approach to tax reform, specifically, the "single tax" framing. Commons concluded The Distribution of Wealth, with an estimate that "perhaps 95% of the total values represented by these millionaire [sic] fortunes is due to those investments classed as land values and natural monopolies and to competitive industries aided by such monopolies", and that "tax reform should seek to remove all burdens from capital and labour and impose them on monopolies." However, he criticized Georgists for failing to see that Henry George's anti-monopoly ideas must be implemented with a variety of policy tools. Commons wrote, "Trees do not grow into the sky—they would perish in a high wind; and a single truth, like a single tax, ends in its own destruction." Commons uses the natural soil fertility and value of forests as an example of this destruction, arguing that a tax on the in-situ value of those depletable natural resources can result in overuse or over-extraction. Instead, Commons recommends an income tax-based approach to forests similar to a modern Georgist severance tax.^[108][109]

Other contemporaries such as

George has also been accused of exaggerating the importance of his "all-devouring rent thesis" in claiming that it is the primary cause of poverty and injustice in society.[112] George argued that the rent of land increased faster than wages for labor because the supply of land is fixed. Modern economists, including Ottmar Edenhofer have demonstrated that George's assertion is plausible but was more likely to be true during George's time than now.^[39]

An early criticism of Georgism was that it would generate too much public revenue and result in unwanted growth of government, but later critics argued that it would not generate enough income to cover government spending. Joseph Schumpeter concluded his analysis of Georgism by stating that, "It is not economically unsound, except that it involves an unwarranted optimism concerning the yield of such a tax." Economists who study land conclude that Schumpeter's criticism is unwarranted because the rental yield from land is likely much greater than what modern critics such as Paul Krugman suppose.^[113] Krugman agrees that land value taxation is the best means of raising public revenue but asserts that increased spending has rendered land rent insufficient to fully fund government.^[114] Georgists have responded by citing studies and analyses implying that land values of nations like the United States, the United Kingdom and Australia are more than sufficient to fund all levels of government.^{[115][116][117][118][119][120][121]}

Economists Bryan Caplan and Zachary Gochenour have argued that a 100% Georgist tax would destroy the incentive to search for natural resources and discover optimal locations for businesses, as the additional profits that would result from such discoveries would lead to a corresponding increase in the unimproved value of the land, and so be taxed away.^[125] Georgist economist Fred Foldvary has responded by arguing that Caplan and Gochenour rely on a confused definition of land that includes produced capital goods. If land does not include any produced capital goods and is merely an unproduced natural resource, then their claim that LVT is distortionary does not follow. Additionally, Caplan and Gochenour build on Frank Knight's critique of Georgism, which Foldvary claims has been refuted.^[126]