More about Georgism and Land Taxes

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.

Also from This Issue

Lead Essay

  • The Pragmatic Libertarian Case for a Basic Income Guarantee by Matt Zwolinski

    Matt Zwolinski argues that a basic income guarantee (BIG) could very easily do better than our current welfare state by many different criteria. It would be far more efficient. It would be less subject to rent-seeking. It would be easily accessible by the poor, and its benefits would flow to them rather than to the middle class. Although there are many libertarian objections to a BIG, Zwolinski nonetheless argues that when faced with a choice between a BIG and the status quo, libertarians should be open to making the change.

Response Essays

  • Is a Basic Income Permissible? by Michael Huemer

    Michael Huemer argues that while a basic income guarantee might be better than the status quo, this amounts to some rather faint praise. A basic income guarantee would necessarily violate some people’s rights, while a fully legitimate government must never violate anyone’s rights. The problem of political authority will likely remain a barrier to all similar proposals, even if we may happen to find this problem’s full implications troubling.

  • When the Basic Income Guarantee Meets the Political Process by Jim Manzi

    Jim Manzi doubts that a basic income guarantee would emerge from our political process while still bearing its purportedly beneficial features. Compromises would proliferate, as would paternalistic controls. The interests of the bureaucracy would assert themselves, and the temptation to make exceptions would prove overwhelming to the electorate. Moreover, when a basic income guarantee has been tried in practice, the result has consistently been a withdrawal of participants’ labor. Scaled to an entire society, the result of such a withdrawal may be dire.

  • Let’s Try a Basic Income and Public Work by Robert H. Frank

    Robert H. Frank agrees with Matt Zwolinski that a basic income guarantee would achieve the welfare state’s goals more effectively than our current patchwork of programs. But he argues that a basic income guarantee sufficient to end poverty would spawn massive taxpayer resentment. Incentives to work would be undermined both for recipients and for those whose tax dollars funded them. Frank recommends a combination program that would include a significantly smaller cash grant and a standing offer of public employment for any who desired it. Frank defends taxation against libertarian objections and offers several additional taxes that he believes should be implemented. He argues that these should help pay for the expensive programs here being considered.

The Conversation

Letters to the Editor

  • The Basic Income Guarantee: Simplicity, but at What Cost? by Michael D. Tanner

    The Cato Institute’s Michael D. Tanner examines the Basic Income Guarantee and finds that its simplicity wouldn’t survive the political process. Difficulties abound, arising both from practical politics and from the realities of our current welfare expenditures. Tanner recommends consolidating our welfare system and simplifying it, but he does not endorse a Basic Income Guarantee.

  • Libertarianism and the Pragmatic Case for a Universal Basic Income by Ed Dolan

    Economist Ed Dolan shares some of his findings on the Basic Income Guarantee. He finds that work disincentives will indeed exist under a BIG, and yet these may be smaller than the work disincentives we already experience owing to the welfare state as it now exists. Libertarians should not be tempted by the so-called “gospel of work,” he says; libertarianism, rather, is about the gospel of freedom of choice.