What is Georgist Public Finance Theory?

Published by Thomas Herold in Economics, Laws & Regulations, Real Estate

'Georgist Public Finance Theory' is explained in detail and with examples in the Laws & Regulations edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

Georgist Public Finance Theory refers to an economic school of thought. Also known as geoism, this relates to the idea that economic value which comes from property including natural opportunities and natural resources ought to belong in kind to every individual in a society. They simultaneously believe the production value each individual produces should be owned by each contributing member according to what they produce.

The philosophy came from the works of Henry George. This Georgist paradigm provides solutions to ecological and social issues. It does this by depending on the concepts of public finance and land rights while striving to combine both social justice and optimal economic efficiency.

As such, this Georgist Public Finance Theory concerns itself with the fair distribution of economic rents created by pollution, monopolies, and the control over commons. This includes privileges and rights such as intellectual property and titles of ownership for natural resources. Those natural resources that have a limit on their available exploitable supply are able to produce economic rents. Georgists claim that placing a tax on economic rents is fair, efficient, and also equitable.

The principle policies of the Georgists maintain that taxes should be assessed based upon the value of the land. They feel that any revenues created by an LVT land value tax will eliminate or reduce those taxes on investment and labor which are both inefficient and unjust. Some of the followers of the Georgist Public Finance Theory argue for the redistribution of extra public revenues to be returned to the inhabitants via a dividend payment to the citizens or a basic income distribution.

Land value tax is called progressive by many economists dating back to Adam Smith and his Wealth of Nations. These taxes are mostly paid in by the landowning class of wealthy individuals. They can not pass them on to renters of the land, workers, or tenants. The idea behind land value taxes is that they should ameliorate inequalities in economics, increase wages, lessen the vulnerability which economies suffer from such as property bubbles and credit manias, and take away any motivations to abuse real estate.

The basis philosophically for Georgist Public Finance Theory hails back to a few of its early advocates like Baruch Spinoza, John Locke, and Thomas Paine. Yet the person who made the entire concept of gathering in public revenues from the privileges of natural resource ownership became popularized by the social reformer and economist Henry George via his first work Progress and Poverty which was published in 1879.

The ideas of Georgist Public Finance Theory became most influential and widespread in acceptance in the early 20th and late 19th centuries. There were whole communities, political parties, and even institutions which were founded on these ideas at the time. Early followers of George’s philosophy on economics were many times called Single Taxers. This was based upon the idea of obtaining public revenues only from privileges on land. Today’s Georgists have altered this foundational belief to include a wide range of government funds’ sourcing.

There were a few communities founded under the Georgist Public Finance Theory principles back in the late 1800s and early 1900s in the United States. Three of them which still exist and function under these ideals are Fairhope, Alabama which arose under the governance of the Fairhope Single Tax Corporate in 1894; Arden, Delaware that Fran Stephens along with Will Price founded a few years later in 1900; and Altoona, Pennsylvania which still operates under only a single land tax to this day.

Internationally, the German sphere of influence in Jiaozhou Bay or Kiaochow within China fully implemented the Georgist Public Finance Theory policies. The only government revenue source that they relied on came from a six percent land value tax levied throughout the territory. The German Imperial administration hoped that this would eliminate the land speculation problems which had arisen in their southwest African colonies.

This objective was achieved successfully in their China sphere of influence as the hoped. These Georgist ideas became a part of the societal fabric in one form or another in such far flung nations and territories as Hong Kong, Australia, South Africa, Singapore, South Korea, and Taiwan. Such countries still assess one form of land value tax or another today.

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The term 'Georgist Public Finance Theory' is included in the Laws & Regulations edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.