Land taxation could fund basic income

Last month readers from 20 countries (listed below) were attracted to the site, many reading Richard Murphy’s review of Colin Hines’ book about Progressive Protectionism but even more focussed on basic income, as John McDonnell announced that Labour has set up a ‘working group’ to investigate universal basic income, with Guy Standing (SOAS) as one of its economic advisers, a co-founder of the Basic Income Earth Network (BIEN).

For some years, America’s Nicholas D Rosen, a Patent Examiner at the Patent and Trademark Office, has advocated land taxation. In a 2012 forum entry he cites a book by economist Joseph Stiglitz, ” The Price of Inequality: How Today’s Divided Society Endangers our Future”.

Though Joseph Stiglitz expresses concern about America becoming less egalitarian and mentions reducing rent-seeking as a solution, Rosen points out that he does not mention the ultimate form of rent-seeking: collecting the ground rents of land.

He continues: “If an increasing share of gross national product is going to the top 1%, it is at least in part because they are the people who own most of the valuable land, and the rents of land are absorbing a larger share of production”.

The revered laws of the market do not apply: Rosen (2008) points out that no one is making more land to keep the price down by competition. 

Rosen’s solution: tax the value of land, and cut taxes on earned income, sales and so on, making the tax system more progressive. He comments: “Unlike most schemes for doing so, it would not cause the productive to quit work, turn their efforts to finding loopholes in the tax code, or take their skills and capital elsewhere”.

Nine years later he has written a letter to the Financial Times’ editor:

Your editorial “Robot tax, odd as it sounds, has some logic” (February 21).

Regarding the possibility of taxing robots to preserve jobs, calls to mind Henry George’s Progress and Poverty. Writing in 1879, George noted that if labour-saving technology reached perfection, labourers would get nothing and capitalists would get nothing; all production would go to the owners of land, as land would still be needed despite automation.

Rather than proposing to tax robots, the great economist advocated a single tax on the value of land.

If we should ever achieve complete automation, this would enable people to be supported out of citizens’ dividends.

Short of complete automation, land value taxation still has important advantages, such as letting people keep what they earn by their own efforts, and putting the burden of taxes on those who enjoy the privilege of holding land that they did nothing to create.

He ends: “It would also help to make housing affordable and prevent the speculative bubbles in land prices that currently contribute to the boom and bust cycle”.






Posted on March 27, 2017, in Basic income, Taxes, New Economics and tagged , , , . Bookmark the permalink. 2 Comments.

  1. Jeremy Heighway writes from Germany:

    It’s not quite clear to me who actually wrote this bolded
    bit, or when:

    “The revered laws of the market do not apply: no one is
    making more land to keep the price down by competition.”

    The forum entry was actually made in 2012 (not join date of
    poster) – and someone has apparently added the bit about
    laws of the market.

    Anyway, I disagree here. Land does not necessarily need to be
    produced to create a supply, as it is not generally a
    perishable item, along with various other mutterings I could
    make about supply AND demand.

    Another part of the article also makes it sound as if any
    shade of grey automatically becomes either black or white:
    “all production would go to the owners of land”. Admittedly
    this was written in 1879, but the disease of taking some
    scenario and then inferring something wildly one-sided from
    it still seems to be alive and well today.

    I consider taxing the value of land more highly as a
    possible partial source of finance for a basic income, but
    almost argue the other [way] as well by saying that each
    individual should have the right to an “allotment” area
    which is untaxed, regardless of the perceived/market value
    it may have.

    I certainly do not agree with a rather than approach –
    “Rather than proposing to tax robots, the great economist
    advocated a single tax on the value of land.”

    We need to tax robots and/or our consumption of energy much
    more highly than we do today, but there needs to be an
    allotment of some kind in place here too to protect the
    poor. As a basic income is, in itself, designed to provide
    protection, energy use may thus be taxed highly as long as
    the basic income takes this into account.

    There are questions about international trade if most of the world
    trades on the playing field of having cheap energy, but that
    would be moving to a different topic.


  2. Thank you Jeremy – corrected


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