The Multiple Benefits of Economic Rent Capture
GroundSwell, July-August 2008]
This past July, I joined Green Party of Ontario members Mike
Nickerson (author of Life Money and Illusion), Bruce Hearns (GPO
Finance Critic), Donna Dillman and John Fisher in attending a
conference in Kansas City, MO, dedicated to promoting the work of
the 19th century American economist Henry George. This
conference is an annual event, part of the international Georgist
movement calling on governments to collect economic rent instead of
taxes on income and consumption.
In his seminal book Progress and Poverty (1879), George builds on
the work of Adam Smith, David Ricardo and John Steward Mill,
enumerating the multiple benefits to the economy and society when
governments are financed by collecting economic rent.
Economic rent refers to the societal surplus that flows to assets
like land, resources, the right to pollute, billboards, the stock
market, the electromagnetic (EM) spectrum, agricultural quotas, etc.
Although this wealth rightfully belongs to the community, which
created it in the first place, it presently flows to private asset
owners, forcing governments to damage the economy by taxing incomes
and consumption. This economic theory is supported in the work
of, among others, Winston Churchill, Dr. Sun Yet-Sen, Mark Twain and
by John Kenneth Galbraith, who called the idea "compelling".
Speakers and panelists at the conference argued that taxing incomes
makes people more expensive to hire, that taxing capital increases
the cost of borrowing, that taxing profits pushes companies closer
to bankruptcy, and that taxing consumption raises prices.
Economists call these dead weight taxes that stifle economic
vitality and cause unemployment and poverty. On the other
hand, funding government programs by capturing the
community-generated, unearned income that accrues to desirable
finite assets increases economic efficiency, eliminates poverty and
unemployment, halts sprawl, conserves resources and reduces
Conference presenters explained that economic rent capture has many
profound and beneficial implications. Collecting unearned income
rather then earned income eliminates antipathy toward paying taxes,
since people keep all of the hard-earned cash earned from jobs and
businesses. Collecting economic rent from the relatively few sources
is far less bureaucratic then administering the taxation of hundreds
of millions of jobs, businesses and purchases. Infrastructure
becomes self-financing, since collecting the rise in land value is
used to finance the project. Economic rent capture eliminates
real estate speculation, which is the root cause of recessions and
depressions, including the present crash. Taxing pollution and
stimulating the productive economy biases toward labour-intensive
local production raises wages and spawns new businesses.
Right-pricing land stops sprawl and fosters walkable communities
linked by transit.
Economic rent capture has been practiced extensively in the past
and is clearly beneficial in jurisdictions where it is used today.
Alberta and Winnipeg used it in the early 20th century, Japan, Hong
Kong and Taiwan are more recent examples, and it is how Sydney paid
for their Olympics. Alaska, Alberta and many other countries use it
when collecting oil royalties.
With communism, socialism and Marxism now abandoned in favour of
free markets, with interventionist Keynesianism discredited as doing
more harm than good, and with trickle-down economics mocked as a
cynical justification for unconscionable wealth disparity,
governments should now return to what Fred Foldvary calls "Foundational
Economics", quash the damaging speculative economy and allow a
purely entrepreneurial economy to work its magic.