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Post-Corona Balanced-Budget Super-Stimulus: The Case for Shifting Taxes onto Land

A case for responding to the economic effects of the Covid-19 crises by shifting federal tax burdens onto land value taxes. The authors develop an econometric model of the US economy, and show that raising tax rates on land, balanced by decreasing tax rates on capital and labor, can maintain current levels of expenditure and debt, while raising welfare and output.

2021

Academic Paper

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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.
Charles Goodhart Michael Hudson T. Nicolaus Tideman Michael Kumhof
Land Value Tax
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