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The math is simple enough, but I don't understand what the terms and formula of the model are, and what assumptions are going into them. Can you explain it?
It turns out that raising land value taxes to 100% would only double the amount of land taxes already being collected.
I don't see why this follows. Why does it double the amount of taxes collected?
This was originally a blog post. It is a proposed economic policy. It is hand-wavy and non-rigorous. I thought it might be of interest here.
*Tax the land, pay the people.*
The Terrestrial Dividend consists of a tax and a dividend. Revenue is generated with a tax on the unimproved value of land and distributed as a cash dividend to all citizens.
## Why?
### If You're in Favor of Wealth Redistribution
If you are in favor of wealth redistribution, you should want to raise as much money as possible, as fairly as possible, and get as much as possible into the hands of those who need it.
The Terrestrial Dividend accomplishes all of these goals.
### If You are Against Wealth Redistribution
If you are not in favor of wealth redistribution, you should want revenue generation to be as efficient as possible, and to minimize the negative economic impact of distribution. Additionally, you should want wealth redistribution to be done in such a way that if it is harmful, incentives align to reduce it.
The Terrestrial Dividend accomplishes all of these goals.
## The Terrestrial Tax
The Terrestrial Tax is economically efficient. The supply of land is fixed, so a tax on the unimproved value of land does not prevent the production of more land. A tax on widgets, on the other hand, reduces the incentive to produce widgets.
The Terrestrial Tax is progressive. Land is owned by the wealthy, so the wealthy would pay a much greater share of the tax. Due to the fixed supply of land, the tax cannot be passed on to tenants.
The Terrestrial Tax respects privacy. The government does not need to know who owns what land, or what they are doing with it. The tax can be collected with anonymous payments, and only in the case of non-payment must the government involve itself.
The Terrestrial Tax cannot be avoided. It is impossible to hide land or disguise use of land.
The Terrestrial Tax encourages productive economic activity. Since the tax is levied on the unimproved value of land, under-utilized land is a liability, and will be brought into productive use or sold, not held as a speculative asset.
The Terrestrial Tax is simple. Income, sales, value-added, and corporate taxes require enormously complex and err-prone reporting. The details of these taxes are the source of endless political litigation. Under the Terrestrial Tax, the only complexity is in fairly valuing the unimproved value of land, clearly an easier task.
The Terrestrial Tax is legible. The negative effects of a too-low or too-high tax rate can be observed and the rate corrected.
## The Terrestrial Dividend
The Terrestrial Dividend is beneficial. Cash is more useful in all circumstances than in-kind payments of the same value. The people who need help will get the most benefit possible.
The Terrestrial Dividend is fair. All citizens receive equal-sized cash payments. There is no need to exclude certain recipients, since the wealthy will already pay more tax than they receive as dividend.
The Terrestrial Dividend is efficient. Cash payments avoid the overhead of defining the details of and administering in-kind benefits.
The Terrestrial Dividend is what people want. People prefer cash over in-kind benefits of the same value.
The Terrestrial Dividend is unobtrusive. It is not means tested, nor does it require an application. The poor are the least equipped to fill out applications and submit documentation of income, so this ensures that even the very worst off have the best chance of receiving benefits.
The Terrestrial Dividend is legible. The negative effects of a too-low or too-high dividend can be observed and the amount corrected.
## Together
The Terrestrial Tax and Dividend are good policies on their own, but even better together due to aligning incentives.
If you want to increase the amount of the dividend, you should want to increase the value of all land, so that the dividend can be increased.
If you want to reduce the amount of the tax, you should want to increase the value of all land, so the tax rate can be reduced without reducing the divided.
Under the Terrestrial Dividend, everyone should care about reducing government overhead and waste, because it comes out of their own pockets.
Also, everyone should care about removing bad policies and implementing good ones, because they increase the value of all land and make everyone better off.
Tax the land, pay the people.
Assessing the "unimproved value" of land is likely non-trivial and politically fraught. And the rate of taxation will be under pressure to rise (especially since most recipients are not landowners). More importantly, the amount of money that governments want to collect pretty much requires a diverse set of mechanisms and payers - there's no way to collect enough taxes from any one source.
Assessing the "unimproved value" of land is likely non-trivial and politically fraught.
I think that's fair. It seems like existing forms of taxation are worse in that respect though.
And the rate of taxation will be under pressure to rise (especially since most recipients are not landowners).
That's also true of existing mechanisms of taxation and wealth redistribution.
More importantly, the amount of money that governments want to collect pretty much requires a diverse set of mechanisms and payers - there's no way to collect enough taxes from any one source.
Agreed.