Janan Ganesh on Why the Tories Should Embrace a Wealth Tax

by Reihan Salam

Recently, my friend Janan Ganesh made the jump from The Economist, where he had covered British politics for the last few years, to the Financial Times, where he writes a column on the same broad subject. But now that he is writing under his own byline, the world is finally getting to know Janan’s distinctive worldview, which marries elements of the right (a tough law-and-order stance, an emphasis on civic cohesion over multiculturalism, a willingness to defend London’s financial sector) and the left (an enthusiasm for industrial policy, support for certain kinds of economic populism).

His latest FT column, which is behind a paywall unfortunately, is pegged to the Liberal Democrats’ annual conference in Brighton, and it begins by making the case that Nick Clegg, the leader of Britain’s third party (and on rare occasions its fourth, depending on how UKIP is faring), was clearly correct to form a coalition with the Conservatives. Yet he also notes that Clegg has seen his support dwindle, and that he is in need of a new defining issue that could give him a boost. Janan argues that the right issue for Clegg is wealth taxation — specifically, he calls on Clegg to call for lowering income taxes and National Insurance contributions while imposing levies on property or land value. And then he argues that the Conservatives should also embrace such a proposal.

The idea of a “wealth tax” is obviously rankling to American conservative ears. A tax on land value, however, has virtues that other forms of wealth taxation do not. I wrote about the virtues of such a tax back in 2009:

In 1879, Henry George, a brilliant if slightly crankish autodidact, published Progress and Poverty, a scathing polemic that blamed all economic ills on the private ownership of land. A staunch believer in laissez-faire economics, George found it perverse that we tax productive activities like work and innovative investment while letting landowners grow rich simply because they scooped up property at the right time. In that spirit, George called for a “Single Tax” on the unimproved value of land. There’s a certain compelling logic to the Single Tax that stands the test of time. When you tax income, aren’t you punishing people for working hard? But when you tax an asset like land, you’re simply encouraging the most valuable use of that land. In the years since George faded from the scene, a number of economists, from Milton Friedman to Paul Romer, have found virtue in the Single Tax, not least because it creates the right incentives for government. Simply put, the better you govern, the more valuable the property. The more valuable the property, the more revenue you raise.

This idea might have particular resonance in England, where London and the Southeast have seen a dramatic increase in property values that has caused considerable consternation.

Earlier this year, Bryan Caplan and Zachary Gochenour offered an interesting search-theoretic critique of Georgism, though I’m not sure how applicable it is to modern Britain. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.