It’s Time to Levy the Land | naked capitalism

There are growing calls for increased use of land value taxes to replace income taxes and corporations taxes as a major source of government revenue. Yves Smith points out:

Income and sales taxes add to the price of doing business, and hence reduce their supply and competitiveness. Most economists – even Milton Friedman – recommend that the more efficient tax burden is one that collects economic rent – property rent, fees charged for using the airwaves, monopoly rent, and other income that is basically an access charge. If you tax land rent, for instance, this doesn’t raise the price of housing or office space. The rent-of-location is set by the market place……

I agree with Michael Hudson that our income tax system encourages the use of debt, over-use of which was one of the primary causes of the recent GFC:

Our tax system favors debt rather than equity financing. By encouraging debt it has prompted a tax shift onto the “real” economy’s labor and capital. The resulting interest charge and tax shift mean that we’re not as efficient and low-cost producers as we used to be…..

But I have two concerns:

  1. Introducing new taxes without abolishing the old leaves scope for government to increase tax revenues as a percentage of GDP over time. And few things are more inefficient — and more harmful to growth — than government spending.
  2. Focus on land value taxes alone, while neglecting other rent-producing assets such as patents, copyright ownership, rights to airwaves, and even brand ownership may skew investment towards, and inflate the price of, these lower taxed assets.

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