What is Georgism and How Can it Save America?

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The economic theories of Henry George are certainly ripe for a comeback. Those who favor the incredibly flawed single tax theory may be able to wrap their heads around Henry George’s idea of an alternative to a sales tax. Followers of Glenn Beck should be able to latch onto Georgism since it fully supports the ideological spirit of capitalism. Lefties can support Georgism since it rejects much of the concrete assumptions of capitalism and takes up issues related to social justice. What is Georgism?

Henry George posited the revolutionary proposal that labor, capital and land are the three most important components in the relations of production. History has created the situation where the business owner and worker are entitled to their due because they earn it, but the landowner’s share is completely unearned. The reasoning behind this is that the landowner benefits not because he actually contributes anything, but because society has accepted the idea that the right of ownership can be determined by the State. The rent that a landowner collects is always going to rise because the population continues to increase which in turn increases the desirability of locations near things like work, recreational areas, schools, shopping centers, etc. In something of a head smack against Malthusian economics, Henry George argues that the landowner’s share gets bigger and bigger as the population increases, while the laborer’s declines. The upshot is that George locates the causes of poverty directly within the concept of private ownership of land.

Georgism is an economic theory that supports the concept that those who have improved the land through actual labor have a right to property on the land. The land itself, however, remains forever in the ownership of society at large. Henry George’s solution was to tax the full and complete economic rental of the land by taking all land value that was created through population growth. Value created by improvements would not be subject to taxation. Henry George foresaw two ultimate outcomes of this concept of economics. One, those who owned substantial land that had not been improved or developed would be compelled to make the land available to others that would mostly be small landowners. The second outcome was that this would allow all other forms of taxation to be abandoned because taxing the land would produce more than enough revenue.

Georgism is, then, an alternative to the single-tax concept that places an unfair burden on lower income people to come up with money for a sales tax; a burden that isn’t placed on the rich. To see just how unfair the national sales tax idea really is, all you need to do is figure out who is going to be hurt more by having to cough up an extra $20 in taxes at the grocery store: the guy working the counter at McDonald’s or the CEO of McDonald’s. On the other hand, a single tax that only affects landowners is far more equitable.

Nobel Prize-winning economic Milton Friedman is just one person who is on record as supporting Georgism’s land value tax as a workable solution to tax system in America that is just too unwieldy and weighted in favor of the rich. Environmentalists like Henry George’s ideas because he seems to suggest the basic philosophy that ownership of land is mythical at best and dangerous at worst. Capitalist can accept the idea because Henry George rejected the easiest manner of making this idea work: nationalizing all land and charging a rent for it. Hong Kong raised 35% of its revenue from the basic premise of Georgist principles and doing so allows it to keep other taxes low.