Includes 4 previously unpublished essays by 1996 Nobel laureate William Vickrey
Hardly a day passes without some comment in the press on the adverse effect of taxation on some sector of the economy. Recent headlines include:
Financial Services firms hit by VAT on outsourcing.
Budget hits road haulage industry hard.
EU tax threat to eurobonds remains unresolved.
[Rolling] Stones cancel tour over 12m tax bill.
Incorrect tax bills sent to 800,000.
As Milton Friedman pointed out: “There is a sense in which all taxes are antagonistic to free enterprise – yet we need taxes… so the question is, which are the least harmful taxes?” He answered his own question: “In my opinion, the least bad tax [note the switch to singular] is the property tax on the unimproved value of land, the Henry George argument of many, many years ago.”
This collection of 20 essays examines a number of the unique properties of Land-Value Taxation (‘the Henry George argument’). It is more efficient – both government and industry would benefit from lower administration costs. It is more equitable as between one industry and another and between rich and poor. While freeing enterprise of many vexatious burdens, it could ensure a more environmentally responsible attitude with less red tape.
Friedman is not alone in recognising its merits: Prof. Joseph Stiglitz, a former World Bank Chief Economist and Nobel laureate, wrote some years ago: “Not only was Henry George correct that a tax on land is non-distortionary, but in an equilibrium society … tax on land raises just enough revenue to finance the (optimally chosen) level of government expenditure.”
This endorses another point in ‘the Henry George argument’, namely that a Land-Value Tax is not an additional tax, but an alternative way to fund government which would ensure that, in the words of Adam Smith, “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 of the great body of the people, might be the same after such a tax as before”.
The same point was made by Prof. Martin Feldstein, chief economic adviser to President Reagan: “One of the reasons that economists have long been interested in the tax on pure rental income is that it is a tax without excess burden … the tax induces no distortions and therefore no welfare loss”.
Kenneth C. Wenzer is a historian who lives in Takoma Park, Maryland. He received his PhD in History from the Catholic University of America in 1991. He is the author of Anarchists Adrift and editor of The Henry George Centennial Trilogy.
“One of the reasons that economists have long been interested in the tax on pure rental income is that it is a tax without excess burden … the tax induces no distortions and therefore no welfare loss.”
Journal of Political Economy