Most of the economic value of land is due to the benefits of living or working in a high-population-density area. Roughly, the reason why it is beneficial to live in a high-population-density area is that this makes feasible a greater variety of mutually beneficial trades. Call this value “population density value.” Now, there is the question of who is entitled to the population-density value – should landowners capture it, or should it be redistributed?
(A) One view (which I discussed in my last post) is that this value should not be subject to the Georgist land tax, because it is not part of the unimproved value of the land; it is produced value. However, on this view, as I’ve suggested, a proper land tax is only going to collect a pittance.
(B) Another view is that landowners have no special claim to the population density value; they aren’t more responsible for the existence of population density value than the non-landowning members of the same community. Therefore, it is fair to tax away that value. This appears to be the assumption of all those who give large estimates for the proceeds that would be gained from a land tax (including one of the commenters on my previous post).
This latter view, however, still won’t provide much comfort for basic income proponents. Here are three reasons for this:
1. Most current landowners have not really received a large portion of population density value, since the price they initially paid to purchase their land already reflected the population density value as of the time of purchase. It would only be fair to tax them for the increment in population density value since the time of purchase, due to new people moving into the area. Thus, the amount collected would be much smaller than indicated by estimates based purely on the current land value.
2. There is no moral reason (at least not along the lines we’ve been considering) why people in low-population-density areas should receive transfers from people in high-population-density areas. Population-density value is created by people choosing to live near other people. Thus, if we’re following the idea that people should profit from the value that they produce, the people in rural areas should receive little.
3. Most importantly, since population-density value is due to trade opportunities, people who do not contribute to the trading opportunities in their community should presumably not receive a share of the population-density value, and people who make a greater contribution to those opportunities should receive a greater share. This is all based on the assumption, roughly, that individuals ought to capture the value created by themselves.
So for example, unemployed people should receive little or none of the population-density value, since the addition of unemployed residents to a city does little or nothing to increase trade opportunities for others.
Thus, if we rest the case for a basic income on this kind of (libertarian, Georgist or semi-Georgist) rationale, the people whom the basic income proponents are most concerned to help are the ones least entitled to receive it.