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The Single Tax

The Single Tax. Ryan Murphy. Schumpeter on Henry George.

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The Single Tax

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  1. The Single Tax Ryan Murphy

  2. Schumpeter on Henry George “The proposal itself, one of the many descendants of Quesnay's impot unique, though vitiated by association with the untenable theory that the phenomenon of poverty is entirely due to the absorption of all surpluses by the rent of land, is not ECONOMICALLY unsound, except in that it involves an unwarranted optimism concerning the yield of such a tax. In any case, it should not be put down to nonsense. If Ricardo's vision of economic evolution had been correct, it would even have been obvious wisdom. And obvious wisdom is in fact what George said in 'Progress and Poverty' (ch. 1, Book IX) about the economic effects to be expected from a removal of fiscal burdens - if such a removal were feasible.” -J. Schumpeter (1954: 831-832)

  3. What good might the single tax do? (Harriss 1973) • Make local government viable. • Increase transparency for voters. • Explicitly links value of services provided with tax. • It is “fair” to capture socially created value. • “An old tax is a good tax.” • Taxing the pure rent is not a burden. • Very low compliance cost. • From 1963-1973, revenue doubled, so it should be able to keep pace with community needs. • You do not discourage production of land because quantity of land is given.

  4. Other Benefits • Restrain animal spirits in the housing sector (Case 1997). • There is some reason to believe that a single tax may cover government expenditures in developing nations (Moser and Tideman 2009). • It dovetails nicely with the federalism/subsidiarity/decentralization/ devolution trend (Netzer 1997).

  5. Hayek’s Criticism “There still exist some organized groups who contend that all these difficulties could be solved by the adoption of the ‘single-tax’ plan, that is, by transferring the ownership of all land to the community and merely leasing it at rents determined by the market to private developers. This scheme for socialization of land is, in its logic, probably the most seductive and plausible of all socialist schemes. If the factual assumptions on which it is based were correct, i.e., if it were possible to distinguish clearly between the value of ‘the permanent and indestructible powers of the soil,’ on the one hand, and, on the other, the value due to the two different kinds of improvement – that due to the communal efforts and that due to the efforts of the individual owner – the argument for its adoption would be very strong. Almost all the difficulties we have mentioned, however, stem from the fact that no such distinction can be drawn with any degree of certainty. In order to give the necessary scope for private development of any one piece of land, the leases that would have to be granted at fixed rents would have to be for such long periods (they would also have to be made freely transferable) as to become little different from private property, and all the problems of individual property would reappear. Though we might often wish that things were as simple as the single-tax program assumes, we will find in it no solution to any of the problems with which we are concerned.” Hayek (1960: 352-353)

  6. Knight’s Criticisms (Emmett 2008) • George’s Ricardian analysis did not understand that marginal valuation of land was the same as the valuation of capital and labor. • Knight was skeptical of anything that purported to be “the” solution. • He believed it unethical to presume that one may know scientifically which principals to apply to fix social problems in advance.

  7. Other Criticisms • Public choice argument: land becomes effectively owned by politicians, not the community (Rothbard 1997 [1957]). • Georgist analysis underestimates the entrepreneurial importance of individuals bringing marginal land into production (ibid.). • What does “unimproved land” even mean? (ibid.) • Implementing the tax today would hurt the poor rather than help them (Brown and Smolka 1997). • Certain public investments actually hurt certain land values (ibid.)

  8. What offers significant producer surplus today? • If supply curve properly drawn with subjective opportunity cost in mind, there isn’t much rent. • Business executives? • Occupational Licensure • Intellectual Property and “Superstar Professions” • Tax away rent of professional sports players? • Tax the Arts?

  9. Other Observations • Transaction costs will be significant as housing is reallocated. • Land taxation is good if the government is a Leviathan (Brennan and Buchanan 1980; Grossman and West 1994).

  10. Works Cited Brennan, Geoffrey and James M. Buchanan. The Power to Tax: Analytical Foundations of a Fiscal Constitution. Cambridge: Cambridge University Press. Case, Karl E. 1997. “Volatility, Speculation, and the Efficiency of Land Markets.” In Land Use & Taxation: Applying the Insights of Henry George. H. James Brown, Ed. Cambridge, MA: Lincoln Institute of Land Policy. Emmett, Ross B. 2008. "Frank H. Knight's Criticism of Henry George." American Journal of Economics & Sociology 67 (1): 61-66. Grossman, Philip K. and Edwin G. West. 1994. “Federalism and the Growth of Government Size: An Extension.” Public Choice 79: 19-32. Harriss, C. Lowell. "Property Taxation: What's Good and What's Bad About It." American Journal of Economics & Sociology 33 (1): 89-102. Hayek, F.A. 1960. The Constitution of Liberty. Chicago: University of Chicago Press. Moser, Bruno and NicolausTideman. 2009. “Property and Land Taxes.” In Tax Policy in Vietnam: Key Issues and Reform Proposals. The World Bank. Netzer, Dick. 1997. “The Centralization and Decentralization of Government and Taxation.” In Land Use & Taxation: Applying the Insights of Henry George. H. James Brown, Ed. Cambridge, MA: Lincoln Institute of Land Policy. Rothbard, Murray. 1997 [1957]. “The Single Tax: Economic and Moral Implications.” In The Logic of Action II: Applications and Criticisms from the Austrian School. Northampton, MA: EdwarElger Publishing. Originally published by Foundation for Economic Education, Irvington-on-Hudson, New York. Schumpeter, Joseph. 1954. History of Economic Analysis. New York: Oxford University Press.

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