I’m excited that Matt Yglesias responded1 to what I thought was a very good question about land-value taxes. In short, the tax base for a land-value tax is land’s unimproved value (i.e., neglecting the value from buildings or other improvements), so to first order a given parcel is taxed the same whether it’s overgrown with weeds or sites a beautifully restored craftsman.
Matt’s concern is that the idea is politically a non-starter:
But there is a big political economy problem with Georgism. The idea is to redistribute resources from landowners to non-landowners, but landowners are a majority of the American population…and they don’t want the land to get cheaper.
To the extent Georgism means a single2 land-value tax set to collect 100 percent of rents, I agree. This would impact American homeowners by distributing wealth to the minority who don’t own land. It would also be particularly burdensome because the land most Americans own doesn’t generate rents in the sense of liquid revenue paid by a tenant but merely grants them the right to live in their own home rent-free.
But I think a more modest proposal would be vastly more palatable and still broadly beneficial. Instead of a single, 100 percent land-value tax, only replace existing property taxes and set the rate to be revenue neutral. This is still redistributive (otherwise we haven’t actually changed anything), but now in a more populist (read: politically feasible) way. Now, the flow of wealth isn’t from landowners to non-landowners but from those with high-value (especially unimproved) land to those with high-value assets on low-value property.
I’d love to see data, but my gut is that the typical single-family homeowner wouldn’t see much of a change, and that the brunt of the impact would be felt by people who are dramatically underutilizing their land: owners of low-density (read: single-level) parking lots in dense downtowns; landlords renting out old apartments next to newer higher-density housing; single-family homes near new mass transit hubs; single-story storefronts in local commercial hubs; and run-down houses in up-and-coming neighborhoods. These examples come to mind because I see them regularly, they are exactly the type of land that I’d rather see redeveloped and put to better use, and it seems like a modest land-value tax would be an important first step in creating aligned incentives.