Should Cities Enact Land Value Taxes? by Atlantic Cities

File Type: Free Content, Article
Release Date: February 2014
Average Rating:       (0 Ratings)
K Street, Washington, D.C.

A recent Atlantic Cities article suggests a novel way to resolve the “class war” now taking place in San Francisco and other U.S. cities is to enact the land value tax, also known as the Henry George tax (after the San Francisco economist who came up with the idea more than 100 years ago). George’s insight centered on a core principle: the value of land is more than just the value of the things on it. A fair way to tax land, he suggested, would be to tax its value rather than the structures built on top of it. In later years, economists like Joseph Stiglitz and Paul Krugman determined that the Henry George tax is not just fair; it’s also efficient.

In “This 100-Year-Old Idea Could End San Francisco’s Class War,” author Noah Smith says “the Henry George Tax has many good points and few downsides. Unlike income taxes, sales taxes, or corporate taxes, the Henry George Tax has no chance of choking off economic activity; after all, the amount of land is fixed, so you can’t tax it out of existence. Also, unlike the property taxes we have now, a Henry George Tax actually encourages landlords to build useful, valuable stuff on top of the land they own. Conventional property tax pays people not to build things on their land, since doing so will mean having to pay more tax. But, the Henry George Tax – which would replace conventional property taxes – makes buildings and other productive structures tax-free, thus encouraging landowners to build more of them.”

Smith goes on to argue that a Henry George tax in San Francisco “would bring rents down, and thus encourage tech companies and their brilliant employees to keep moving into the city, to keep interacting, mixing and generating ideas that make the tech world go. At the same time, it would raise the money the city needs to build better trains; run more bus lines; and build more public housing that will benefit the poor and middle class of San Francisco. And, it would do it all in a way that seems much more fair than other kinds of taxation."