author

Charles Goodhart

London School of Economics & Political Science (LSE) - Financial Markets Group

Increasing the tax rate on land, balanced by a decrease in the tax rates on the income of capital and labor, can provide a fiscal means to stimulate the economy while maintaining current levels of expenditures and debt. Increasing the tax rate on land from 0.55% to 5.55%, balanced by reductions in taxes on capital and labor by 28% and 10%, respectively, would increase the welfare of a representative household by 3.4%, and increase output by 15%. In an econometric model, land value taxation yields double the amount of welfare and output gains as a wealth tax that raises the same revenue. "Most land rent is paid out as interest to banks and that bank credit is a major driver of increases in housing prices." In other words, unaffordable housing may not be a mere symptom of inequality, but rather, a key driver of it. Land represents about 40% of household assets in the U.S. The US has experienced three major, differing systems of government finance. The period before 1839 was mostly financed through land sales and chartering corporations. The period between 1839 - 1933 was marked by local governments financed through property taxation, and the period after 1933 was marked by a national government financed via income taxes.
Post-Corona Balanced-Budget Super-Stimulus: The Case for Shifting Taxes onto Land
Land Value Tax
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