For those not familiar with the work of Henry George (1839-1897), he is best-known today for the thesis of a book called Progress and Poverty, which after its original publication in 1879 became a best-seller in the late 1880s and into the 1890s. He argued for a land tax as a practical method of financing government in a way that would also be more fair and efficient.
For a modern take, there is a Henry George Foundation today, and its website offers an overview of a proposal for a land tax in the United Kingdom: “LVT [land value taxation] is an annual, nationally determined, nationally collected, percentage tax, paid by the freeholder, on the open market value of all land with no exceptions.” Notice that a land value tax is not identical to a property tax—which includes both the value land but also the value of the housing or commercial buildings, or land improved in various ways (say, for agriculture or recreation purposes). Thus, a land value tax does not rise when you build something on a given property; conversely, a plot of land with nothing built on it, right next to a similar plot of land with a house or factory built on it, would be taxed the same amount.
In the late 19th century, when George was writing, very large amounts of land in the United Kingdom were owned by those who were noble or rich or both. They could block this land from being developed, and thus limit the ability of towns to expand, for either housing or industry. By taxing what that undeveloped land would sell for on the open market, there would be an incentive to sell off some of that land. Moreover, if the government built, say, a railroad link through a certain area, then the value of the undeveloped land close to the railway would rise–thus providing an even greater incentive to sell off some of the land.
A land tax would work somewhat differently today, of course. But one can imagine a situation where a suburb has very restrictive zoning–say, one house per acre. However, if it was possible to develop that land with, say 16 small houses or an apartment building on that acre, that property could be be taxed on what the underlying land was worth–not just on the value of the single home on the property.
I will not try here to argue the case for and against a land tax in any detail. Instead, I’ll point to an historical episode that illustrates some of its practical difficulties. Samuel Watling tells the story in “The failure of the land value tax” (Works in Progress, Issue 18, March 13, 2025).
In the UK circa 1900 , the national government was primarily funded by an income tax, which paid for the military and the civil service. About one-quarter of the income tax revenue was passed along to local governments, which were responsible for “poverty relief, the police, education, and sanitation.” In what we would today call “unfunded mandates,” the central government has passed laws requiring that the local governments provide certain levels of poverty relief, police, education (for ages 5-12) and sanitation, but without sufficient funding to do so.
Local UK governments of this time had property taxes available to them as an option. A main use of property was renting the land, either for housing or business. Thus, a tax on property was largely a tax on rental income: according to Watling, “three quarters of funding for local government activities – poverty relief, the police, education, and sanitation – came from taxing rental income. Since urban rents added up to about 10 percent of GDP at the time, this meant that one tenth of the economy was responsible for financing almost the entirety of local authority budgets.” As one would expect, a tax on rental income is largely passed along to the renters. For well-to-do cities, these taxes on rental income raised enough money for the public services they were obligated to provide. For poorer cities, with greater needs for welfare spending and less valuable property to tax, the situation was more difficult.
In the predictions of Henry George, a land tax could address these issues, and in a sweeping way. Watling explains:
But these marginal improvements – reducing the disincentive to improve land and providing more funds for urban councils – were only part of the reason Liberal Georgists favored land value taxation. George had promised his followers nothing short of Utopia. George argued that since all production needs land, competition would push labor and capital returns down to minimum levels, leaving all remaining economic surplus to accumulate as land rent. Therefore, he concluded taxing land rent alone could fund all government activities since it captured society’s total surplus value. Intercepting this entire social surplus with the land value tax, he argued, would provide not just all the money the government needed but enough to end poverty and create a harmonious society in which all humans could fully satisfy their innate needs and desires.
Events happened, as they do. Watling provides details. For my purpose, the key fact is that the Liberal Party ended up enacting a set of land taxes in 1911, and set about the task of placing a value not on a given property–which could be valued based on the rent paid or by comparison with similar properties nearby–but only on the land. For properties that provided revenue via mining, this calcualation was reasonably straightforward. But a land tax based on what the land would be worth, if it was developed more fully or at all, was a harder calculation. Watling again:
There were close to ten million properties in the country that needed valuing, and for the majority of these properties, the land and structure had been traded together, meaning that there was no distinct market valuation of land to draw from. What’s more, in line with Georgist theory, the tax was supposed to credit owners for improvements they made to the land. But this meant calculating several hypotheticals, many of which had never been measured or recorded, including building and structure value and value contributed from plumbing, access to railways, and other infrastructure contributions. The process was beyond the capacity of the government. In August 1910, the Liberals sent out 10.5 million copies of the notorious ‘Form 4’, which required owners to submit specific details on their income and the use and tenure of their properties. It also required them to estimate the site value themselves. Failure to return the document carried a fine of £50, about £7,500 in current prices.
The pushback was extreme. There were lawsuits galore, until one of the land taxes (there were several) was invalidated entirely. Setting aside the tax complianc costs being imposed on landowners, the costs to government of implementing the tax were considerably greater than the additional revenue raissed. Moreover, although the promise of a land tax was that it would encourage use of underutilized land, it instead imposed immediate costs on underutilized land, so that owners and potential builders of that land lacked funding for construction. Rates of building dropped, rather than rising.
Perhaps all of this could have been worked out over time, but events contineud to happen, as they do–in this case, World War I. By the time the Great War was over, the Liberal party had lost its appetite for pursuing land taxes further, and abolished them in 1922. The difficulties for local governments across the UK to raise funding for their required activities continued–and in some ways continue to the present day. For the land tax in particular, Watling notes:
[T]he pure land value tax is chimerical. Those countries that raise substantial amounts of tax from land, such as Japan and the USA, do so through taxes on property … A pure tax on the unimproved value of land has never been successfully implemented anywhere. Land value taxes introduced in Australia and New Zealand have been repealed. Denmark’s land value tax is a minor quirk of the system, comprising less than two percent of total revenues.
Henry George was writing in the context of his time and place–the United Kingdom at the tail end of the 1800s. One can argue that a pure land tax could have been a sensible approach in that time and place. In other times and places–and with the property tax as a proven and practical alternative–it’s harder to make the case.
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