We need taxes on land value and natural resources

American economist Henry George did have some influential supporters

“No matter where you look or what examples you select, you will see that every form of enterprise, every step in material progress, is only undertaken after the land monopolists has skimmed the cream off for himself.”

That wasn’t written by some wild-eyed radical but by Winston Churchill, considered by some to be the greatest British prime minister of the 20th Century.

Churchill was writing in defence of a land value tax as proposed by Henry George, an American economist who lived in the late 19th Century.

A land value tax is a levy on the unimproved value of land. Unlike the property taxes we have here in B.C., it does not include the value of improvements such as buildings.

It could be said that the global economic system lost its way over 100 years ago when the world’s leaders failed to embrace Henry George’s ideas.

It wasn’t that George didn’t have some influential supporters.

David Lloyd George, the prime minister of Britain during much of the First World War, was an admirer. His People’s Budget of 1909 included a tax on the value of land – something that was vigorously opposed by the House of Lords.

Mahatma Gandhi, the leader of the Indian independence movement, was another admirer. He supported a land value tax and saw it as part of viewing landowners as the stewards of the land.

Dr. Sun Yat-sen, revered as the father of modern China by both the Nationalists on Taiwan and the Communists on the Mainland, saw three principles to guide a new China: democracy, nationalism, and “right livelihood,” by which he meant a Georgist tax system.

Interestingly, he found precedents in Chinese history.

This is because Henry George got many of his ideas from the French Physiocrats of the 18th Century, who in turn got many of theirs from Chinese philosophers.

The French phrase “laissez-faire” came from the Chinese “wu-wei,” which means “non-doing” and is an important concept in Daoism. Today, of course, it is used to justify precisely the sort of monopolist behaviour that the Physiocrats and Henry George were trying to control.

In the early 1900s, Leo Tolstoy wrote the tsar to encourage him to bring in a land value tax to avoid civil unrest. The tsar did not listen to his advice, possibly because he was the country’s biggest landowner. Instead, the tsar got the Russian Revolution and ended up being killed with his family.

Henry George is almost unknown today but land value taxes are used in a number of jurisdictions, including parts of Australia and the United States, as well as Hong Kong.

Closely related are taxes on natural resources. The philosophy behind land value tax is that, while the value of improvements belong to the landowner, value of the land ultimately belongs to the community.

Any damage to the land or other natural resource, or reduction in its value, therefore needs to be compensated for.

A good example of this would be a carbon tax, which essentially is a fee charged for polluting a common resource – our atmosphere.

A furnace needs a thermostat to keep from running too hot or too cold.

Similarly, our economy needs feedback mechanisms, such as a land value tax and related taxes on natural resources, such as a carbon tax, to keep it operating on an even keel.