↑ comment by blogospheroid ·
2012-09-09T03:42:41.646Z · LW(p) · GW(p)
but removing the compensation part of the program vitiates the original point.
I disagree. Let me explain.
Let us consider 2 worlds. World A has strict lockean property legislation, income taxes, the government investing in infrastructure, justice and otherwise a minimal state.
World B has strict property legislation, land taxes, the government investing in infrastructure, justice and otherwise a minimal state.
In world A, anyone who has moved away from their parents' home and is seeking their way in the world has to pay 2 charges - rent and taxes. Or if they set up a shop, the full capitalized value of the rent of the land and taxes.
In world B, they have to pay just rent, or if they are setting up a shop, the much lower capitalized value of the rent of the land.
Yes, in world B, the rent may be slightly higher, because the worlds are pretty similar technology wise. But I doubt that the total payment will be as high as World A.
That was benefit 1.
The more important point is the effect of land speculation/maintaining land idle on the margin of production. The margin of production is a georgist concept of the land that is of least value, the land that in classic economics is rent free. Anyone who works the least productive land earns the full product as wages. So, the least productive land sets a floor on the wages in a society, the margin of production.
In world A, there is a tendency to buy land and keep it idle or utilised sub-optimally because of speculation that due to publicly funded improvements/infrastructure which will happen in time, the land will gain in value and later can be sold at a higher rate, without taking any risk. Any capital investment ends up competing with this expected rate of nearly risk free return. This lowers capital investment and pushes the margin of production further and further. A further margin of production implies land of lower value, which implies lower wages. Lower capital investment implies lower wages,
In world B, where there are land taxes, anyone buying any land will buy it only with the intent of using it for a specific purpose. If it is as an investment, they will try getting cash flow out of it. If it is residential, they will calculate the minimum that they can afford and hold it there. This means a higher margin of production, higher capital investment. Both of these imply higher wages, all other things being equal.
That was benefit 2.
In a world of georgist land taxes, there can be significant savings in business from the lower costs of compliance and accounting. Yes, there will be attempts to manipulate land tax also. But there is a certain ceiling to that, because land value can be maintained as a public record. If someone files his returns showing a rate of $10/sq ft when his neighbour without any differences has filed at $20/sq ft, it is too easy to come back and force person 1 for a revision.
So, these 3 benefits are there even for a georgist tax system without any compensation redistribution, just maintaining a minimal rule of law state with investment in infrastructure.